On 03 March 2020 in the Senedd, Welsh Assembly Members voted to approve the Final Budget, first presented in draft on 16 December 2019 by Rebecca Evans, Minister for Finance and Trefnydd.

The Final Budget was changed little from the Draft Budget following discussion, with increases in cash revenue and allocations only 0.02% of the total budget allocation.

The Welsh Rates of Income Tax 2020/21

The Final Welsh Budget was published on 25 February 2019, at which time the proposed Welsh Rates of Income Tax (WRIT) were confirmed.  On 03 March 2020, Rebecca Evans made the following proposal:

To propose that the National Assembly for Wales in accordance with section 116D of the Government of Wales Act 2006, agrees the Welsh Rate Resolution for the 2020-21 Welsh rates of income tax as follows:

  • the proposed Welsh rate for the basic rate of income tax is 10p;
  • the proposed Welsh rate for the higher rate of income tax is 10p;
  • the proposed Welsh rate for the additional rate of income tax is 10p

During the debate, it was confirmed that HMRC are moving to a ‘business as usual’ process regarding the administration of the Welsh Rates of Income Tax.  They have correctly identified 97% of Welsh Taxpayers and allocated a C prefix code.  Welsh Government officials are working with HMRC to increase this percentage.

Following debate, the necessary Welsh Rate Resolution was made, setting the above Welsh Rates of Income Tax for 2020/21.  There were 43 AMs voting for the Welsh Rate Resolution, 6 abstentions and 1 against.

So, for Welsh Taxpayers, there is no difference in the Income Tax payable compared to rest of the UK (rUK) Taxpayers.  This applies even if there are changes to the rUK rates of Income Tax in the UK Budget next week.

Budget Vote

The actual Budget itself was also approved with 27 voting for it, 1 abstention and 22 voting against.

The Future?

HMRC and the Welsh Government now move from the transitional phase of implementing WRIT to the ‘live’ stage.  By this, I mean that the Income Tax raised in 2019/20 in the first year of the WRIT was never actually paid directly to the Senedd in Cardiff Bay – however, it will be for 2020/21 and onwards.

The Welsh Government have pledged not to raise the rates for the duration of this Assembly session, due to end in May 2021.  I would have thought that a new administration would look to use the WRIT powers that have been devolved in a way that truly meets the needs of the Welsh Government’s plans and the people of Wales.  This means looking at the amount of Income Tax that is required to meet Wales’ spending plans and, maybe, looking at peoples’ ability to pay – i.e. the lower-paid pay less and the higher-paid pay more.

Further, I would have thought that identification of 97%, whilst impressive, is still far less than the goal of 100% accuracy.  Moving to business as usual suggests that HMRC and the Welsh Government consider 97% acceptable.  Things must have improved since Llyr Gruffydd, Chair of the Finance Committee issued a statement in May 2019 saying that HMRC had admitted that a Scottish tax code had been applied to some Welsh Taxpayers (for completeness, see also the statement from Rebecca Evans and HMRC’s reply to Mr Gruffydd blaming employers and some software providers).

For payroll professionals and software developers, it is a comfort that there is no change for the moment though!

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