Explanatory note

These Regulations make consequential amendments to the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682) (“the principal Regulations”) which make provision for the assessment, charge, collection and recovery of income tax in respect of all pay as you earn (“PAYE”) income.

Regulations 3 to 5 make consequential amendments to the principal Regulations as a consequence of the power of the National Assembly for Wales to set a Welsh rate of income tax on non-savings income provided for in Part 4A of the Government of Wales Act 2006 (c. 32). The power is exercisable for the tax year 2019-20 and subsequent tax years.

Regulation 3 amends the definitions of “additional rate”, “basic rate”, and “higher rate” in regulation 2 of the principal Regulations to reflect the Welsh rate of income tax. Regulation 3 also inserts definitions of “Welsh rate” and “Welsh taxpayer” into regulation 2 of the principal Regulations.

Regulation 4 inserts a new paragraph (2B) into regulation 7 of the principal Regulations to reflect the “C code” which will be used where an employee is a Welsh taxpayer.

Regulation 5 inserts a new paragraph (v) into regulation 108(2)(d) of the principal Regulations to include the Welsh rate of income tax in any calculation of tax payable under PAYE settlement agreements (“PSAs”).

An Impact Assessment covering this instrument was published on 10 June 2014 alongside the draft clauses and explanatory notes for the Wales Bill and is available on the website at https://services.parliament.uk/Bills/2014-15/wales/documents.html. It remains an accurate summary of the impacts that apply to this instrument.