Welsh taxpayers pay income tax on earnings, pensions and most other non savings income at Welsh rates. Each rate is built by taking 10 percentage points off the UK basic, higher and additional rates and adding a Welsh rate set by the Senedd; for 2026 to 2027 the Welsh rate is 10p in every band, so the rates are 20%, 40% and 45%, the same as England and Northern Ireland. HMRC decides who is a Welsh taxpayer from their main home and puts a C at the start of their tax code.

How are the Welsh rates worked out?

Section 6B of the Income Tax Act 2007 sets a three step calculation for each of the Welsh basic, higher and additional rates:

  1. Take the UK basic, higher or additional rate.
  2. Deduct 10 percentage points.
  3. Add the Welsh rate (if any) set for that year for that band.

For 2026 to 2027 the result is:

Band (standard Personal Allowance) UK rate less 10 points Welsh rate Rate paid
Basic: £12,571 to £50,270 10% 10p 20%
Higher: £50,271 to £125,140 30% 10p 40%
Additional: over £125,140 35% 10p 45%

The money follows the split. HMRC’s PAYE manual (PAYE100040) explains that tax attributable to the Welsh rates goes to the Welsh Government, while tax at the reduced UK rates goes to Westminster. The arrangement has applied to non savings, non dividend income since 6 April 2019, The Welsh rates were set at 10p for the first year, 2019 to 2020, and the 2026 to 2027 budget statement describes 10p as maintaining current levels, so Welsh taxpayers currently pay the same overall rates as people in England.

Who sets the rates, and when?

The power is in section 116D of the Government of Wales Act 2006. The Senedd passes a Welsh rate resolution, and the section sets firm rules for it:

  • it covers one tax year only, and the whole of that year;
  • it must be made before the tax year starts and not more than 12 months before;
  • each Welsh rate must be a whole number or a half;
  • only the First Minister or a Welsh Minister may move the motion;
  • if it is cancelled before the year starts, the year runs as if it had never been made, and a replacement can be passed.

In practice the rates come with the Welsh budget. The Cabinet Secretary for Finance’s statement on the draft budget for 2026 to 2027, made on 14 October 2025, proposed 10p in each band, subject to Senedd approval before the final budget, to keep parity with England and Northern Ireland. The Welsh Government also publishes a ready reckoner estimating what each 1p change would raise.

What can the Senedd not change?

The Welsh power is narrower than Scotland’s. The Senedd can move each of the three rates up or down, but it cannot:

  • change the bands. The Welsh Government confirms that the points where the higher and additional rates start are the same as in England and Northern Ireland;
  • change the Personal Allowance, which stays at the UK level;
  • tax savings or dividends, which stay with the UK government at UK rates (see dividend allowance and tax rates);
  • add new bands, as Scotland has done with its starter, intermediate, advanced and top rates (compare Scottish Income Tax).

One extension is coming. The Finance Act 2026 adds Welsh property basic, higher and additional rates from 2027 to 2028, calculated in the same way: the UK property rate less 10 points, plus a Welsh rate set by the Senedd.

Who is a Welsh taxpayer?

Section 116E of the Government of Wales Act 2006 defines a Welsh taxpayer as someone who is UK resident for income tax for the year and meets one of three conditions:

  • Condition A: a close connection with Wales. With one home in the UK, that means the home is in Wales and you live there for at least part of the year. With two or more homes, your main place of residence must be in Wales for more of the year than it is in each other part of the UK, considered separately (section 116G).
  • Condition B: no close connection with England, Scotland or Northern Ireland, and more days in Wales than in any other part of the UK. A day counts where you are at the end of it, ignoring a passenger in transit who arrives one day and leaves the next (section 116H).
  • Condition C: at any time in the year you are an MP for a Welsh constituency or a Member of the Senedd. Someone who is also a Scottish parliamentarian is dealt with by section 116F.

The tests mirror the Scottish ones word for word, so the worked examples in who is a Scottish taxpayer apply equally to Wales. GOV.UK sums up the main home factors: it is usually where you live and spend most time, but may be the home where you spend less time if that is where most of your possessions are, where your spouse or civil partner lives, and where you are registered with your bank, GP or car insurer. Status lasts for the whole tax year. If you move to or from Wales, you pay Welsh rates only if you lived in Wales longer than anywhere else in the UK in that year, and HMRC backdates any change to 6 April. You must be UK resident first; see the statutory residence test.

What does the C in a tax code mean?

HMRC adds a C to the start of a Welsh taxpayer’s code so the payroll applies Welsh rates. The PAYE manual gives C1100L, CK100, C0T and CBR as examples of the format, so someone with the standard allowance has C1257L. The flat rate codes used for second jobs and pensions also have Welsh forms:

Code Meaning
C0T Personal Allowance (Wales) used up, or the employer lacks the details to give a code
CBR All income from this job or pension taxed at the Welsh basic rate
CD0 All income from this job or pension taxed at the Welsh higher rate
CD1 All income from this job or pension taxed at the Welsh additional rate

The NT code and the emergency code process are the same across the UK. Self Assessment filers tell HMRC they pay Welsh rates in a box on the online return. More on code structure is in PAYE tax codes explained.

How do pension relief and Marriage Allowance work?

For relief at source pensions, section 192(1A) of the Finance Act 2004 says the scheme deducts relief at the Welsh basic rate where HMRC notifies the scheme that the member is a Welsh taxpayer. Welsh higher and additional rate taxpayers claim the rest, and section 192(4B) gives it by extending the basic rate limit and higher rate limit by the gross contribution, exactly as in England. While the Welsh basic rate is 20%, the cash result is identical. PAYE100040 also confirms that Welsh taxpayers can receive Marriage Allowance where their income is within the basic rate band.

What would a different Welsh rate cost?

Illustration only. Rhian lives in Newport and earns £30,000 of salary with the standard Personal Allowance, so £17,430 is taxed at the basic rate.

  • At the actual 2026 to 2027 Welsh basic rate of 20%, her tax is £3,486. Of that, the 10p Welsh slice, £1,743, goes to the Welsh Government.
  • If the Senedd had set the Welsh basic rate at 11p, her rate would have been 21% and her tax £3,660.30, an extra £174.30.
  • Her savings interest and any dividends would be taxed at UK rates either way.

What mistakes do people make?

  • Not updating an address. HMRC uses its address records to set the C prefix; a stale English address means the wrong code.
  • Treating a C code as an error. It is correct for Welsh residents even though the rates currently match England.
  • Using the employer’s location. A Bristol employer with staff living in Monmouthshire should expect C codes for them.
  • Assuming Wales sets bands. Only the three rates, and from 2027 to 2028 the property rates, can differ.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.