In November 2018 HMRC wrote to over two million customers, with their main residence in Wales, telling them about Welsh rates of Income Tax (WRIT) which comes into effect from April 2019. All people living in Wales who are subject to Income Tax, including individuals who earn below the Income Tax threshold, should have received a letter informing them that the Welsh Government would be taking control of the Income Tax rates and allowances.
As a result, the amount of tax you pay on most taxable income such as wages and pensions may be affected. Your Personal Allowance (the earnings you do not pay tax on per year) will stay the same as the rest of the UK. Tax on dividends and savings interest will also remain the same as the rest of the UK.
Employees or people who receive a pension will be given new tax codes that begin with a ‘C’. People who complete a Self-assessment tax return online will be asked about their country of residence.
The Welsh Government will be setting the WRIT but HMRC will continue to administer this as part of the UK Income Tax system. For 2019/20 there is no change to the rates and allowances.
Who does it apply to?
All individuals identified as ‘Welsh taxpayers’ will be liable.
A Welsh taxpayer is defined as someone who is resident in the UK for tax purposes and, in the course of the tax year, satisfies any of the following criteria:-
1. They are a Welsh parliamentarian
2. They have a “close connection” to Wales through either:
a) Having only a single “place of residence”, which is in Wales; or
b) Where they have more than one “place of residence”, having their “main place of residence” in Wales for at least as much of the tax year as it has been in each other part of the UK
3. Where no “close connection” to Wales or any other part of the UK exists (either through it not being possible to identify any place of residence or a main residence) – through day counting.
For the vast majority, this will be a relatively straightforward conclusion to come to. However, as we experienced when the Scottish rate of Income Tax was introduced, we expect there to be some unique scenarios which we will be happy to advise upon.