The Welsh rates of income tax (WRIT) came into effect on 6 April 2019. They replace ten percentage points of each income tax rate with 10% of Welsh income tax. The total tax payable for 2019/20 by each Welsh taxpayer should be the same as for an equivalent taxpayer in the rest of the UK (excluding Scotland).
Each Welsh taxpayer should have been issued with a new PAYE code for 2019/20 with a C suffix. If the employer ignores the C suffix when applying the PAYE code through their payroll software, the correct amount of tax will still be collected, but it won’t go to the right place.
The Welsh tax paid on earnings and profits (WRIT doesn’t apply to savings, dividend or gains) is collected by HMRC and paid over to the Welsh Government. If the C code is not used the Welsh Government won’t get the money it is due.
Some Welsh taxpayers who should have received an C code were instead allocated an S code for 2019/20, which is reserved for Scottish taxpayers. This does have an effect on the amount of tax paid by the individual, as the Scottish income tax rates and bands are quite different to those used in the rest of the UK. HMRC is unable to confirm the extent of this error, but it has affected a number of government departments and agencies.
HMRC should issue the Welsh or Scottish PAYE code based on the individual’s correspondence address, if this has not been updated with HMRC an incorrect code may be issued. However, in some cases the PAYE computer is picking up the address of the employer or pension payer as the taxpayer’s address.
Can all clients review the PAYE codes used for employees who live in Wales or Scotland, to check that the correct country code has been applied.
Written by the Tax Advice Network