LETTER’S SPELLING OUT TAX CHANGES

IT MAY have already arrived, or could still be set to land on your doorstep – but whenever it arrives, don’t panic when you see an official looking brown envelope on the doormat.

It’s a letter from the Welsh Government which is explaining changes to income tax.

By April 2019, the Welsh Government and the National Assembly for Wales will be responsible for a range of taxes in Wales.

These include land transaction tax, landfill disposals tax and Welsh rates of income tax.

These taxes will contribute funding of around £2.5bn annually for Welsh public services.

In the UK, people pay different rates of income tax depending on how much they earn.

The amount payable depends on how much of a person’s taxable income is above the personal allowance and how much falls into each tax band. Currently, the UK Government decides how income tax should operate in Wales, England and Northern Ireland and, to some extent, in Scotland.

With the exception of the highest earners, everyone benefits from the personal allowance and does not pay any income tax on the first £11,850 they earn.

People who earn £20,000 a year will pay no income tax on the first £11,850 they earn but will be taxed at 20% on the next £8,150. People who earn £50,000 a year will pay no tax on the first £11,850; 20% tax on the next £34,500 and 40% on the final £3,650 they earn.

So, will you be paying more tax? In short, not yet... but you could be.

Each financial year from 2019, the Welsh Government will decide whether to change the rates of income tax paid by Welsh taxpayers or whether to keep them the same as the rates paid by English and Northern Irish taxpayers.

The financial year beginning in April 2019 will be the first year in which the income tax rates paid by Welsh taxpayers will be affected by decisions made by the Welsh Government.

It has committed not to increase income tax rates in Wales for the duration of the current Assembly, which is due to continue until May 2021.

The next Assembly elections are planned for 2021. As part of their manifestos, each political party is likely to spell out their income tax rate plans.

Setting lower rates could allow Welsh taxpayers to keep more of their earnings, but that could mean cuts to public services.

Setting higher rates could raise more money for public services in Wales but could mean taking more money from Welsh taxpayers.