Background to the report

The NAO has statutory responsibilities for auditing HMRC’s collection of Welsh income tax.

Jump to downloads

The Wales Act 2014 gave the Senedd (Welsh Parliament) power to determine the rates (excluding the personal allowance) paid by Welsh taxpayers on all non‑savings, non-dividend income, from 6 April 2019.

Since April 2019, the UK Government has reduced the UK basic, higher and additional income tax rates by 10 percentage points for Welsh taxpayers, and the Senedd has had the power to apply Welsh rates in addition. For each tax band, the rate of income tax paid is the sum of the reduced UK rate and the Welsh rate set for the year.

As in previous years, for 2024-25 the Senedd set the Welsh rates of income tax at 10% across all bands, which meant that the total rates for taxpayers in Wales were exactly the same as the England and Northern Ireland rates, at 20% (basic rate), 40% (higher rate) and 45% (additional rate).

In this report, we describe the amount collected under the Welsh rates of income tax, which represents approximately 43% of the total income tax collected from Welsh taxpayers. The Welsh Government’s resource block grant from the UK Government is reduced by this amount and HM Treasury is responsible for paying these amounts to the Welsh Government. The balance of remaining income tax contributions is paid to the UK Government.

HM Revenue & Customs (HMRC) administers and collects the Welsh rates of income tax as part of the UK tax system. HMRC identifies taxpayers living in Wales by applying a ‘flag’ in its systems that indicates they are subject to Welsh income tax rates. HMRC has calculated that there were 1.6 million Welsh taxpayers in 2023-24 (2022-23: 1.5 million).

Following the end of each tax year, HMRC produces a provisional estimate of tax revenue for that year from the Welsh rates of income tax. It calculates the final outturn the following year, once it has received further information from taxpayers and employers. This report covers the final outturn for 2023-24 and the provisional estimate for 2024-25. HMRC expects to publish the outturn for 2024-25 in its 2025-26 Annual Report and Accounts in July 2026.

Scope of the report

This report assesses:

  • HMRC’s calculation of the 2023-24 Welsh rates of income tax revenue (the ‘outturn’) and assurance on the correctness of amounts brought to account
  • HMRC’s estimate of the 2024-25 Welsh rates of income tax revenue and our view on the estimate methodology
  • key controls operated by HMRC to assess and collect income tax
  • HMRC’s approach to assessing and mitigating the risk of non-compliance with Welsh tax requirements
  • 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

Downloads

Publication details

Related work