Aligning income tax thresholds with England and Northern Ireland, boosting business rates relief, and greater investment in the NHS and social care were among the changes announced in the Draft Welsh Budget.
The plans will next need to be debated in Senedd Cymru - the Welsh Parliament - on 7 February 2023, before a final budget is published on 28 February. The final Budget debate will take place on 7 March.
Here, Which? takes a closer look at what was included in the draft Budget, and how it will affect Welsh taxpayers.
Welsh rates of income tax in 2023-24
A proportion of income tax in Wales is paid directly to the devolved Welsh government income tax is partially devolved to Wales, and as a result the Welsh government has the power to raise or cut the three income tax rates (basic, higher and additional).
All other aspects of the tax remain the responsibility of the Westminster government, and HMRC continues to administer income tax in Wales.
The process involves the Westminster government reducing each of the three UK income tax rates for Welsh taxpayers by 10p in the pound. The Welsh government can then choose if it wants to charge taxpayers in addition to this amount. However, as in previous years, it has chosen to add 10p in the pound, meaning Welsh taxpayers pay the same amount of income tax as those in England and Northern Ireland.
Ahead of the draft Budget publication, there were suggestions that the Welsh government might raise taxes to help pay for services which, like elsewhere in the UK, have been hit hard by high inflation and economic turmoil. However, the idea was struck down by Senedd leader Andrew Davies, who today said it was not a choice a 'serious government' would make in Wales.
However, if you are an additional-rate taxpayer, you will be affected by the threshold change announced by Jeremy Hunt in the Autumn Statement. From April 2023, the threshold for additional-rate tax will be reduced from £150,000 to £125,140. It will mean many higher-rate taxpayers will be pushed into the additional-rate tax band, paying 45% on any income above the new limit.
This means income tax rates for 2023-24 will be as below:
| Tax band | Earnings | Tax rate |
|---|---|---|
| Basic-rate | £12,570-£50,270 | 20% |
| Higher-rate | £50,271-£125,140 | 40% |
| Additional-rate | More than £125,140 | 45% |
- Find out more: income tax in Wales
Council tax reforms considered
Last year's Budget mentioned aims to reform the council tax system in Wales.
Plans have moved on this year, with a consultation launched in July that sought views on updating property values to restructure the current council tax bands, and a consideration of adding bands to help redistribute the tax burden more fairly.
The consultation also asked about the prospect of putting in place rolling revaluation cycles to keep the tax updated in the future.
Although the consultation closed in October, the Welsh government says it is currently considering the responses ahead of a second consultation in the future.
- Find out more: what is council tax?
Land Transaction Tax (LTT)
Land Transaction Tax or LTT replaced Stamp Duty Land Tax (SDLT) in Wales in April 2018. Changes to LTT rates for home movers were introduced on 10 October 2022, raising the threshold at which people start paying the tax on residential properties from £180,000 to £225,000. No changes are set to be made to other rates or thresholds.
- Find out more: Land Transaction Tax - stamp duty in Wales
Business rates relief boost
Business rate relief for Welsh shops, leisure venues, restaurants and bars, which received significant help during the pandemic, will be increased from 50% to 75% from April 2023.
This matches support offered to these industries in England. The Welsh government said the move, which was welcomed by business groups, is aimed to help companies cope with higher costs as a result of soaring energy prices and inflation.
Investment in health, social care and education
Welsh public services are set to receive extra investment in 2023-24, specifically:
- The Welsh NHS will get an extra £165m to protect frontline services.
- Councils will get an additional £227m to safeguard schools and deliver the real living wage for social care workers.
- The education budget will be boosted by £28m. The full £117m consequential from education spending in the Autumn Statement has been provided to local government to fund schools.
source https://www.which.co.uk/news/article/draft-welsh-budget-what-does-it-mean-for-your-money-in-2023-24-ahdCV9R2qfAJ