Tax and NIC in 2008 For 2008/09, the starting rate 10% band for non-savings income is abolished and the two rates applicable to both earned income and pensions for PAYE are basic rate 20% and higher rate 40%. There has not been any announcement about the bandwidths, so at present they remain at the 2007/08 level (40% bandwidth over £34,600, 20% below this figure). Any further changes to bandwidths will be announced in the March 2008 Budget statement. Employers will use new tax tables from 6 April 2008. Tax Tables SR & B to D are being renamed Tables B to D. However, the government in 2009/10 is committed to raising the basic rate tax threshold by £800 a year above inflation. From 2009/10, the upper earnings limit for Class 1 NIC will be aligned with the level of earnings at which higher rate tax becomes payable (the point at which taxpayers start to pay 40% tax after taking into account any personal allowance). From 6 April 2008, the single person’s annual tax allowance for those aged under 65 is increased from £5,225 to £5,435. Age related personal allowances for the over 65’s are to rise by £1,180 above inflation. For a taxpayer aged between 65 and 74 the allowance is £9,030 and for those aged 75 and over £ 9,180. For tax year 2008/09, the code for emergency use is revised to 543L and the PAYE tax threshold set at £105 per week (£453 per month). As a result of this change, employers will apply a general uplift of tax codes, with a suffix ‘L’ by 21, from the first pay day on or after 6 April 2008, as authorised by Form P9X (2008). All other code amendments are notified to employers on Form P9 (T) (or code list, magnetic media or electronic communication). From 6 April 2008, the lower earnings limit for Class 1 NIC purposes is increased in line with inflation to £90 per week (£390 per month). The upper earnings limit is increased by £75 above inflation and set at £770 per week (£3,337 per month). The primary and secondary earnings threshold, the starting point for paying Class 1 NIC liabilities for both the employee and employer, is increased in line with inflation to £105 per week (£453 per month). The employee standard main (11%) and additional (1%) contribution rates of Class 1 NIC remain unchanged, as do the level of contracted-out rebates available to the employee and employer on earnings between the lower and upper earnings limits. The employer pays 12.8% on all earnings above the secondary earnings threshold. From 6 April 2009, the Upper Accruals Point (UAP) is a new threshold for the calculation of both State Second Pension entitlement and contracted-out rebates, replacing the upper earnings limit. All employers will need to record on their payroll deduction record employee earnings between the earnings threshold and the UAP and the UAP and upper earnings limit. The UAP will be set at £770 per week. Paul Tew, Pay Magazine Snowdrop provides a range of Payroll solutions that are fast, flexible and easy-to-use, to suit the many and varied needs of each organisation. To find out more about the software and services that we provide, please click here >> s