Background to the report
The Wales Act 2016 gave the Senedd full power to determine the rates (excluding the personal allowance) paid by Welsh taxpayers on all non-savings, non-dividend income, from 6 April 2017. From April 2019, the UK basic, higher and additional income tax rates were reduced by 10 percentage points and the Welsh Parliament had the power to apply Welsh rates. The sum of the reduced UK rates and the new Welsh rates determines the overall rate of tax paid by Welsh taxpayers. For 2020-21, the Welsh Parliament set the Welsh rates of income tax at 10% across all bands, effectively matching the UK rates at 20% (basic rate), 40% (higher rate) and 45% (additional rate).
Following the end of each tax year, HMRC produces a provisional estimate of Welsh income tax revenue for that year. The final outturn is calculated the following year once HMRC receives further information from taxpayers and employers. This report covers the final outturn for 2019-20 and the provisional outturn for 2020-21.
Scope of the report
The NAO has statutory responsibilities for auditing HMRC’s collection of Welsh income tax. This report considers:
- HMRC’s calculation of the 2019-20 income tax revenue for Wales, the ‘outturn’, and assurance on the correctness of amounts brought to account (Part One);
- HMRC’s estimate of the 2020-21 income tax revenue for Wales and our view on the estimate methodology (Part One);
- key controls operated by HMRC to assess and collect income tax (Part Two);
- HMRC’s approach to assessing and mitigating the risk of non-compliance with Welsh tax requirements (Part Two); and
the cost of administering Welsh income tax. We provide assurance on the accuracy and fairness of these amounts in the context of costs incurred by HMRC (Part Three).