UK tax plans assessed for Welsh impact

On the day of the most significant fiscal event for fifty years, the Wales Fiscal Analysis team produced an explanation of the distributional impacts on Welsh taxpayers.

The Wales Fiscal Analysis team, part of Cardiff University’s Wales Governance Centre, found that from April 2023, the 9,000 additional rate taxpayers living in Wales (those earning more than £150,000 a year) will benefit to the tune of £45 million (£5,000 each on average) from the abolition of the top (45%) tax rate.

On the whole, nearly 90% of the gains from the personal tax cuts will go to households in the top 50% of the income distribution. The richest 10% of households alone will see 40% of the gains.

Due to a cut in the basic rate and the total effect of other changes, the average Welsh household might expect to save a somewhat more modest sum of £400 next year.

The Welsh Government Finance Minister, Rebecca Evans MS, immediately cited the research in her Written Statement responding to the announcement, and in the subsequent Senedd debate.

Ms Evans suggested that:
“…the UK Government hadn't provided a distributional analysis alongside the budget so that we could see very clearly the impact that it would have on the different income distributions across the UK. They hadn't done that work, but, of course, Wales Fiscal Analysis has done work to help us understand what it means for us here in Wales, and I shared some of that with you earlier on today.”

Further impacts are expected on the way the Welsh block grant is calculated, and on expenditure on public services.

The analysis of the UK Government mini-budget is available here.