From 6 April 2019 the Welsh government will have powers to amend the rate of income tax; it can already alter land transaction taxes. What changes are in store and who will they affect?
Draft Budget
The Welsh government published its draft Budget on 2 October 2018. This included its plans for income tax for 2019/20, which will apply to anyone resident in Wales. Welsh income tax will use the same principles as apply in Scotland. That is, 10p of income tax at each rate will be controlled by the Welsh government. For example, if you currently pay tax at 40% to the UK government, from April 2019 you’ll pay 30% and the Welsh government will decide how much in addition you should pay to it.
Earned income only
Like Scottish income tax rates, Welsh income tax will only affect the rate payable on earned income, e.g. salary and profits from self-employment. UK government rates will continue to apply to unearned income, e.g. rental income.
Welsh tax rate
The Welsh government intends to set its income tax rate at 10%. In other words, there will be no change in the overall rate of income tax for Welsh taxpayers until 6 April 2020 at the earliest.
Welsh residents only
The Welsh rate of income tax will only apply to individual’s resident in Wales, but it won’t affect profits earned there. For example, if you run a business located in Newport, Gwent, but live over the border, you won’t pay Welsh tax. You will be resident in Wales for tax purposes if you have:
- a single place of residence which is in Wales; or
- more than one place of residence, and your main place of residence is in Wales for at least as much of the tax year as it has been in each other part of the UK.
LTT
The draft Budget proposal confirms that the Welsh land transaction tax rates and rate bands will remain the same as for 2018/19.
This information is subject to change and is not professional advice. Refer to our disclaimer for more details.
