An administration error has led to some Welsh taxpayers being charged the Scottish rate of income tax by mistake.
How has this tax code mix-up happened?
Since April this year, the Welsh Assembly are able to set their own income tax rates and bands. They are shown as ‘C’, for Cymru, within taxpayers’ tax codes. Unfortunately, according to HMRC, some Welsh employers used ‘S’ instead. This means they have been processed as paying the Scottish rate of income tax.
As reported by the BBC, an HMRC statement says: “We have been made aware of an error in the application of new income tax codes for Welsh taxpayers by some employers which has meant some taxpayers paid the incorrect amount of tax in April. It is the responsibility of the employer to apply the tax codes provided by HMRC and we are working closely with the employers affected and providing support as they investigate and correct the problem.”
Does it make any difference?
Yes, it does make a difference because the Scottish and Welsh income tax rates are not the same. This means that the affected Welsh taxpayers have either paid too much or too little income tax.
For example:
- Welsh taxpayers earning between £24,945 and £43,430 have paid 1% more than they owe.
- Those earning between £12,501 and £14,549 have paid too little income tax because they have been charged the Scottish 19% rate, instead of the Welsh 20% rate.
- Anyone earning over £50,001 has been overtaxed by 1%.
- Income of between £43,431 and £50,000 have paid 21% more than necessary.
How do I check if this is me?
If you live in Wales for the majority of the year, you should be paying the Welsh rates of income tax. Look at your payslip to see if you have been correctly coded with the ‘C’ prefix. If not, and you have an ‘S’ instead, you need to make sure this is rectified on your next month’s payslip.
HMRC are already fixing the problem and any overpayment will be automatically refunded to you in your next pay.
Is it really all down to employers?
Llyr Gruffydd, Welsh Assembly’s finance committee chairman, is not entirely convinced that this is all down to employers: “HMRC’s admission is deeply disappointing as this committee was repeatedly given assurances that mistakes like this would not happen. We raised concerns about the flagging process for identifying Welsh taxpayers during our inquiries into fiscal devolution and the Welsh Government’s draft budget. On each occasion we were told the matter was in hand and the lessons from the devolution of income tax powers to Scotland, where there were similar issues, had been soundly learned and would be put into effect.”
Hopefully this will all be sorted by next payday. If you are affected, keep an eye on your tax code. Remember, the ultimate responsibility for paying the correct amount of tax lies with each individual taxpayer – even if HMRC or your employer make a mistake.