What is Welsh income tax?

We explain who pays Welsh income tax on our page: Do I have to pay Welsh income tax?

What is Welsh income tax?

Welsh income tax has applied since 6 April 2019.

Welsh income tax is not a separate tax. The Senedd Cymru - Welsh Parliament has the power to affect part of the amount of income tax that Welsh taxpayers pay. To do this, the Senedd Cymru - Welsh Parliament can set Welsh rates of income tax, which determine the overall rates of income tax payable by Welsh taxpayers on certain types of income.

HMRC administer and collect Welsh income tax, using the Pay As You Earn (PAYE) and Self Assessment systems. This means that if you disagree with a decision concerning Welsh income tax, you must follow the HMRC appeal process. In addition, if you are unhappy with the service provided, you must follow HMRC’s complaints process.

Broadly, Welsh income tax is payable by ‘Welsh taxpayers’, on their non-savings and non-dividend income.

Welsh taxpayers continue to pay income tax at the same rates that apply in the rest of the UK on their savings and dividend income.

The Welsh government proposes its rates for Welsh income tax in its annual draft budget, usually published in December. These rates must then be agreed and put into law by Senedd Cymru - Welsh Parliament.

For the 2023/24 tax year the rates for Wales are the same as the rest of the UK (excluding Scotland). We cover the rates and bands for non-savings and non-dividend income on our page: What tax rates apply to me?

How does Welsh income tax work?

From 6 April 2019, the Senedd Cymru - Welsh Parliament partially sets the income tax rates that apply to the non-savings and non-dividend income of Welsh taxpayers. So, to date, the only tax years affected are from 2019/20 to 2023/24 inclusive.

For each tax band (basic, higher and additional), the UK government reduces the amount of tax it will collect by 10 pence and the Welsh government sets the Welsh rate of income tax to be added to the UK rates of tax. The amount of income tax you pay on non-savings and non-dividend income according to the Welsh income tax rates goes to the Welsh government.

Since 2019/20 the Senedd Cymru - Welsh Parliament has decided to keep the same rates as the UK rates. This means for the 2023/24 tax year there will be no overall change to the basic, higher and additional tax rates for Welsh taxpayers. The tax bands will be the same for Welsh taxpayers as for UK taxpayers. The rates and bands of tax for non-savings and non-dividend income are explained on our page What tax rates apply to me?

If Welsh taxpayers have taxable savings income, such as bank interest, or taxable dividend income, this is subject to the main UK rates of income tax for those types of income.

Welsh income tax does not affect the tax allowances to which you are entitled, such as the personal allowance. We explain how it affects the marriage allowance below.

How does Welsh income tax affect how much tax I pay?

Welsh income tax took effect from 6 April 2019.

If you are a Welsh taxpayer in 2023/24, you will pay the same amount of income tax overall as you would pay if you were a taxpayer living in England or Northern Ireland with the same amount of earned income. This is because the Senedd Cymru - Welsh Parliament has decided to keep the same rates as the UK rates. This was also the case for the 2019/20, 2020/21, 2021/22 and 2022/23 tax years.

⚠️ Note: National Insurance contributions are not affected by Welsh income tax.

How does Welsh income tax interact with UK income tax?

Welsh income tax took effect from 6 April 2019.

The rates and bands of Welsh income tax for the 2023/24 tax year will be the same as England and Northern Ireland. These are shown on our page Tax and NIC rates.

If you are a Welsh taxpayer, you may have to pay income tax according to both the Welsh rates and the UK rates. This may happen if you have earned income (Welsh income tax) and savings and / or dividend income (UK income tax).

However, in 2023/24 there is no difference in the Welsh income tax rates and the UK income tax rates so the overall amount of tax you will pay will be the same as if you were a UK taxpayer. This was also the case for the 2019/20, 2020/21, 2021/22 and 2022/23 tax years.

As explained above for the 2023/24 tax year, the overall tax position will be the same for a Welsh taxpayer as it will be for a UK taxpayer. This means that there will be no effect on:

• Any tax relief for donations made under Gift Aid
• Any tax relief for pension contributions, both under net pay arrangements and where the providers operate a relief at source arrangement
• Any tax relief on finance costs for residential landlords

What types of income does Welsh income tax apply to?

Welsh income tax took effect from 6 April 2019.

Welsh income tax applies to non-savings and non-dividend income of Welsh taxpayers. So, for example, if you are a Welsh taxpayer, Welsh income tax affects the amount of income tax you pay on:

• employment income;
• profits from self-employment (including from sole trades and partnerships);
• rental profits;
• pension income (including the state pension and social security pension lump sums);
• taxable benefits.

Welsh income tax does not apply to savings income and dividend income. This means it does not affect the amount of income tax you pay on bank or building society interest or dividends.

Construction industry scheme (CIS)

If you are a subcontractor, the payments you receive under the CIS may be subject to deductions – 20% for registered subcontractors; 30% for subcontractors not registered with the scheme. Whether you are a Welsh taxpayer or not, contractors make deductions at the UK rate – either 20% or 30% as appropriate. If you are a Welsh taxpayer, you are liable to pay income tax at the Welsh income tax rates on your earned income, including these CIS payments, and your final tax liability will be calculated through your Self Assessment tax return. However, for 2023/24 the Welsh income tax rates are the same as the UK tax rates so your final tax liability will be the same as if you are paying tax at the UK tax rates. There is more information about how tax is deducted under the CIS on our page What is the Construction Industry Scheme?

How is Welsh income tax collected?

Welsh income tax took effect from 6 April 2019.

HMRC are responsible for the collection and administration of all income tax in the UK, including Welsh income tax.

Welsh taxpayers pay income tax calculated according to Welsh income tax rates under the Pay As You Earn (PAYE) system or Self Assessment.

HMRC notify individuals who appear to be Welsh taxpayers based on the information on their systems. If you receive a notification letter, you should read it carefully and check whether or not you agree with HMRC. If you do not agree, you can appeal.

If you are within PAYE, HMRC issue a tax code to tell your employer or pension payer to deduct the correct amount of income tax. You can tell if you are paying Welsh income tax, as the tax codes for Welsh taxpayers start with the letter “C”, for example, a typical tax code would be C1257L. HMRC may issue you with a PAYE coding notice, or you can check it on your Personal Tax Account. You can also see your tax code on your payslip, form P60 or form P45.

There is information on how to check your coding notice in the employment section.

If you submit a Self Assessment tax return using HMRC online services then you must check the appropriate box on the return to indicate that you are a Welsh taxpayer.

You are not able to see the split between income tax paid according to UK rates and income tax paid according to Welsh income tax rates on your payslip, form P60 or form P45. However, your Personal Tax Account should contain an Annual Tax Summary showing the amount of Welsh income tax you have paid and how it has been allocated towards Welsh government services.

How does the marriage allowance work for Welsh taxpayers?

Welsh income tax took effect from 6 April 2019.

The marriage allowance allows eligible taxpayers to transfer 10% of their personal allowance to their spouse or civil partner. This means the recipient of the marriage allowance benefits from a tax reducer, worked out as 20% of the amount of allowance transferred.

Welsh taxpayers who only pay tax at the basic rate of Welsh income tax (and if relevant the basic rate of UK income tax on savings income) are eligible for the marriage allowance. That is, Welsh taxpayers are eligible, provided they do not pay income tax at the higher or additional rates of Welsh income tax and/or the higher or additional rates of UK income tax (if relevant).

Where can I find out more information?

Our What is devolution? page explains what other taxes have been devolved in Wales and about the Welsh Revenue Authority.

There is general guidance about Welsh income tax on GOV.UK and the Welsh Government website which includes a calculator tool showing how much Welsh income tax you will pay and the sectors it is spent on such as health and education.