If you employ people in Cardiff or anywhere in Wales, you will see tax codes that start with the letter C. They are easy to overlook while the Welsh and English rates are the same, but getting them wrong causes problems later. Here is what Cardiff employers need to know about the Welsh rates of income tax for 2026/27.
In short: a C at the start of a tax code means the employee is a Welsh taxpayer. That depends on where their main home is, not where they work. For 2026/27 the Welsh rates match the rates in England, but you should still apply every C code HMRC issues, so nobody is taxed on the wrong basis if the rates ever differ. Taking on staff for the first time? See our first employee payroll checklist.
What the C in a tax code means
A C at the start of a tax code tells you that the employee’s income from that job is taxed using the Welsh rates of income tax. HMRC adds the C to the code of every Welsh taxpayer, so the standard 1257L code becomes C1257L.
The C can also appear with other codes. HMRC’s guidance for employers lists:
- C followed by the usual code, for example C1257L: tax is deducted from income in the Welsh tax bands.
- C0T: tax on all income with no Personal Allowance, usually when an employee whose main home is in Wales has not given you a P45 or enough details to work out their code.
- CBR: all income taxed at the basic rate in Wales, usually for a second job or pension.
- CD0: all income taxed at the higher rate in Wales, usually for a second job or pension.
- CD1: all income taxed at the additional rate in Wales, usually for a second job or pension.
Scotland has its own version, using an S prefix and different rates, so you may see S codes too if you employ people who live over the border in Scotland.
Who pays the Welsh rates
Welsh rates apply to people who live in Wales. HMRC’s definition is that individuals who live in Wales and have their sole or main place of residence there are Welsh taxpayers.
The key point for employers is that it depends on where the employee lives, not where they work. In practice:
- An employee who lives in Newport and works at your Cardiff office pays Welsh rates.
- An employee who lives in Bristol and commutes to Cardiff does not, because their main home is in England.
- An employee who lives in Cardiff but works for you remotely, or at a site in England, still pays Welsh rates.
Someone’s main home is usually where they live and spend most of their time. If a person has homes in Wales and elsewhere in the UK, other factors can count, such as where most of their possessions are, where their family is, or where they are registered for things like their bank account or GP.
Welsh rates of income tax for 2026/27
For the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, the Welsh rates and bands are as follows, based on the standard Personal Allowance of £12,570:
- Up to £12,570: 0%
- £12,571 to £50,270: 20%
- £50,271 to £125,140: 40%
- Over £125,140: 45%
These are the same as the rates in England and Northern Ireland. For 2026/27 the Welsh rate is set at 10p in the pound for each of the basic, higher and additional rates, which keeps the overall rates level with England.
The Welsh rates only apply to earnings and other non-savings, non-dividend income. Savings interest and dividends are taxed at the same rates as the rest of the UK.
If the rates are the same, why does the C matter?
Because the C code is how HMRC records that the employee is a Welsh taxpayer, and the Senedd sets the Welsh rate each year. If the Welsh rates ever move away from the English rates, any employee on the wrong code will immediately pay the wrong amount of tax. Operating the correct code now avoids corrections later.
How it shows on payslips
Payslips usually show the tax code, so a Welsh taxpayer’s will typically show C1257L or one of the variants above. For 2026/27 the deduction is the same as for an English taxpayer on the same pay and code, which is why a missing C is not always spotted straight away.
Common C code mistakes and how to avoid them
Deciding residency yourself
Employers do not decide whether someone is a Welsh taxpayer. HMRC identifies Welsh taxpayers from address data it gets from individuals, employers and other government departments, and then issues a code to the employer to operate. If an employee thinks their code is wrong, for example because it has no C when they live in Wales, point them to HMRC. They can check and update the details HMRC holds using the online Check your Income Tax service, and HMRC will tell both the employee and you the new code within 15 working days.
Not updating codes when HMRC changes them
When HMRC sends a new tax code during the year, you should update your payroll records as soon as possible. If a C code is issued but not applied, the employee is taxed on the wrong basis.
Software problems
HMRC’s annual report on the Welsh rates notes that a small minority of employers operate codes without the C prefix, and that in many cases this comes from a software error or a missing update. Check your payroll software is up to date before each new tax year.
Employees moving to or from Wales
Employees should update their address with HMRC when they move. Someone pays Welsh rates for a tax year only if they lived in Wales for longer than anywhere else in the UK during that year, and the new rates are backdated to the start of the tax year in which they moved. HMRC then adjusts the tax taken through their code, so you simply apply the new code when it arrives. It is worth reminding staff who move house, especially across the Severn, to tell HMRC.
Frequently asked questions
Who decides whether an employee is a Welsh taxpayer?
HMRC, not the employer. HMRC identifies Welsh taxpayers from address data and issues the tax code for you to operate. If an employee thinks their code is wrong, they can check and update their details with HMRC using the online Check your Income Tax service.
Does someone who lives in Bristol and works in Cardiff pay Welsh rates?
No. It depends on where the employee has their main home. Someone living in Bristol pays the rates for England, while someone living in Newport and working in Cardiff pays the Welsh rates.
What are the Welsh rates of income tax for 2026/27?
With the standard £12,570 Personal Allowance: 20% from £12,571 to £50,270, 40% from £50,271 to £125,140 and 45% above £125,140. These match England and Northern Ireland. Savings interest and dividends are taxed at the same rates as the rest of the UK.
What happens when an employee moves to or from Wales?
The employee should update their address with HMRC. HMRC then adjusts their tax code, and you apply the new code when it arrives.
Let a Cardiff bureau handle it
Payroll Service (UK) Ltd is a Cardiff payroll bureau, established in 2011. We apply the tax codes HMRC issues, including C codes, every pay period, so your Welsh employees are taxed on the right basis.
Get a free quote or call us on 0800 092 6505.
Sources
- Welsh Income Tax (GOV.UK)
- Tax codes (GOV.UK)
- Check your Income Tax for the current year (GOV.UK)
- Employee tax codes (GOV.UK)
About the author: Jack Lloyd-Lewis is director of Payroll Service (UK) Ltd, a Cardiff payroll bureau established in 2011. The bureau runs weekly, fortnightly and monthly payrolls, pension auto-enrolment and CIS for UK employers, overseas companies with UK staff, and accountancy practices that outsource their clients’ payroll, using Sage 50 Payroll and BrightPay.