The Welsh Rate of Income Tax – and Payroll

There is always something happening that will have an effect on payroll. Here we report on the Welsh Rate of Income Tax (WRIT), which is due to start on 1st April. From a payroll perspective this will mean that Payroll Professionals, including outsourced payroll providers such as JL Payroll will need to be aware of the challenges ahead.

What is WRIT?

April 2019 will see the National Assembly for Wales deliver a variation to their rates of income tax that will be payable by Welsh taxpayers. The responsibility for many aspects of income tax will remain with the UK government and the tax will continue to be collected by HMRC for Welsh taxpayers.

How much will the WRIT rate be?

Just as when  the Scottish Rate of Income Tax (SRIT) was introduced, the UK tax rates will reduce each of the three rates of income tax (that is the basic, higher and additional rates) that are to be paid by Welsh taxpayers by 10p. The National Assembly for Wales will then decide what amounts to set in replacement of these reductions.

The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax to be paid by Welsh taxpayers. For example, if each of the Welsh rates that are set and agreed by the National Assembly are 10p, this would result in the rates of income tax paid by Welsh taxpayers remaining the same as those paid by taxpayers in England and Northern Ireland.

The Welsh Assembly has yet to confirm the rates it will set.

What Does This Mean for Payroll?

As and when the Welsh Assembly does announce the WRIT rates, they will need to be built in to payroll software. We are aware that software developers have begun to receive updates and regular communications from HMRC’s software developer support team (SDST), who are also working to deliver a programme of updates that will see the publication of technical specifications for 2019-20.

This will ensure that from April 2019, when WRIT goes live, employers, payroll bureaux, bookkeepers and accountants will be able to operate their payroll processes, confident in the knowledge that for Welsh based employees everything will work smoothly.

As an outsourced payroll services provider, we will be fully compliant.

What About New PAYE Codes?

Employees affected by the change and liable to pay the Welsh rate of income tax will be identified by the addition of a C (Cymru) prefix that will be applied to their tax code.

Income tax regimes impacted by this change will include: PAYE (basic, higher and additional rates); income from pensions and other non-savings sources, and self-assessment.

HMRC and the UK Government are Keeping Some Powers

Not all powers relating to the administration and collection of income tax have been devolved to Welsh government by the Wales Act 2014. Excluded from these measures are:

  • the ability to vary the tax-free allowance or to vary the threshold of the existing tax bands;
  • the ability to introduce further tax bands;
  • the ability for an individual to self-declare their residency status via a change to the starter checklist.

Employer guidance relating to the operation of payroll can be expected to be issued by January 2019 following the ratification of Welsh rates.

What About Changes to an Employee’s Address?

It is vital for employees to keep HMRC informed when they have a change of home address. This is important for a number of reasons, especially to identify whether the taxpayer is a Welsh resident.

Please contact us or call us on 0121 422 0550 for payroll help and advice on WRIT.

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