HM Revenue and Customs (HMRC) has published its annual report on the Welsh Rates of Income Tax (WRIT) for 2026, confirming that the devolved tax generated £3.3 billion for the Welsh Government’s budget during the 2024 to 2025 financial year.
The report, released on 22 September 2026, provides a detailed breakdown of how income tax is administered in Wales and confirms that 1,660,400 Welsh taxpayers were identified during the 2024 to 2025 period.
Under the current system, the UK Government reduces the three main rates of income tax for Welsh residents by 10p. The Senedd then decides the Welsh Rate of Income Tax to be added to these reduced rates. For the 2026 to 2027 tax year, the Welsh Government has maintained the rate at 10p across all bands, ensuring taxpayers in Wales continue to pay the same total rates as those in England and Northern Ireland.
Current total rates for Welsh taxpayers remain at 20% for the basic rate, 40% for the higher rate, and 45% for the additional rate.
Ensuring Taxpayer Accuracy
A significant portion of the report focuses on the “Welsh flag” system used by HMRC to identify residents. Residency is primarily determined by a taxpayer’s main home address. To ensure the accuracy of these records, HMRC confirmed it sent 9,855 letters as part of a third-party data assurance exercise. These letters were used to verify residency status and ensure tax revenue is correctly allocated to the Welsh Government.
A Service Level Agreement update also ensures that the Pay As You Earn (PAYE) system can continue to operate for Welsh taxpayers using the previous year’s rates in the event that a formal resolution is not passed by the Senedd in any given year, providing stability for both employers and employees.
Future Devolved Powers
The 2026 report also highlights upcoming changes to the Welsh tax landscape. Starting in April 2027, the UK Government is set to provide the Welsh Government with new powers to set separate tax rates for property income.
This shift will allow the Senedd to diverge from the rest of the UK specifically regarding income generated from property, such as buy-to-let investments. Preparations between HMRC and the Welsh Government are already underway to manage the technical transition for this new devolved power.
While the Welsh system currently mirrors the rates and bands found in England, it stands in contrast to the Scottish tax system, where several additional bands and different rate thresholds have been introduced over recent years. For now, the Welsh Government’s policy remains one of parity with the UK-wide basic, higher, and additional rate structures.
