Tax devolution timeline

The Wales Act 2014 legislated to devolve tax powers to Wales for the first time in almost 800 years. It enabled the Welsh Government to legislate in respect of areas to which Stamp Duty Land Tax (SDLT) and Landfill Tax (LT) previously applied. These UK taxes were replaced by Land Transaction Tax (LTT) and Landfill Disposals Tax (LDT) respectively.

The Act also legislated for the partial devolution of income tax to Wales which was replaced by the Welsh Rates of Income tax (WRIT).

Non-domestic rates are taxes paid on business properties.

More information about non-domestic rates...

How is the Welsh budget funded?

Before the fiscal powers were devolved to Wales, the Welsh budget was funded entirely by the UK Government’s block grant.

The devolved taxes enable the Welsh Government to raise more of its own revenue for public spending and increase its accountability to the people of Wales.

Infographic showing that the Welsh Government budget is funded by the Welsh Block Grant, non-domestic rates, Welsh rates of income tax, land transaction tax, landfill disposals tax and borrowing. The Welsh rates of income tax, land transaction tax and landfill disposals tax are devolved taxes.


Composition of the Welsh budget

The Office for Budget Responsibility (OBR) develops Welsh tax forecasts. These show that Welsh taxes now constitute almost 20% of the Welsh budget.

Data based on Welsh Government’s 2022-23 Draft Budget

A bar graph showing the composition of the 2022-23 Welsh budget. Welsh block grant £17.7bn (82%), Welsh rates of income tax £2.5bn (11%), Non-domestic rates £1bn (5%), Land transaction tax £366m, Landfill disposals tax £36m. Land transaction tax and landfill disposals tax combined make up 2% of the budget.


How is the amount of block grant decided?

The Welsh Government agreed a fiscal framework with the UK Government which sets out the Welsh Government’s funding arrangements to support its devolved fiscal powers. This includes the block grant adjustment model for determining how the Welsh block grant is adjusted to take into account the devolution of Welsh taxes.

The Barnett formula is a mechanism used by HM Treasury to adjust the funding allocated to Wales through the block grant to reflect changes in public service spending by the UK Government in England.

The fiscal framework set out a modified Barnett formula for Wales. This includes a needs-based factor currently temporarily set at 105%. When funding relative to England has converged to an agreed level this factor will be increased to 115%.

Infographic showing that the Barnett formula is the product of changes in UK Government department spend, a comparability percentage, the Welsh population share and a needs-based factor currently set at 105%.


Borrowing powers

Resource borrowing

Welsh Government can borrow up to £200 million annually (within a total cap of £500 million) if tax revenues are lower than forecast. This has to be repaid in four years.

Capital borrowing

The fiscal framework set out capital borrowing powers which enables Welsh Government to borrow a total of £1 billion with an annual borrowing limit of £150 million. This can be borrowed from the National Loans Fund (through the Secretary of State for Wales) or a commercial bank.

Government bonds

The Welsh Government also has powers to issue government bonds to borrow for capital projects which count towards the total and annual capital borrowing limits set out in the fiscal framework.


The Wales Reserve

The Wales Reserve was established for Welsh Government to deposit any resource or capital funds which can be drawn down to fund future spending. The reserve is held within the UK Government and is capped at a total of £350 million.

There are no limits for payments into the reserve but the Welsh Government can only drawdown £125 million and £50 million for resource and capital spend respectively per year.

Resource funds deposited into the Wales Reserve can be used for both resource and capital spend but capital funds are limited to capital spend.

How funds in the Wales Reserve can be spent







Resource Block Grant


Tax Receipts

Capital Block Grant


Capital Borrowing