PAYE tax codes and tables For 2008/09, the starting rate 10% band for non-savings income is abolished. The two rates applicable to both earned employment income and pensions for PAYE are basic rate 20% and higher rate 40%. From 6 April 2008, new PAYE tax tables B to D are brought into use to reflect the revised two tiered tax system, go to www.hmrc.gov.uk/taxtables/2008/srbd.pdf. This prevents employees incurring a larger than normal deduction of income tax, which would have been the case had the abolition of the 10% starting rate and application of the new tax bands announced in Budget 2008 both been applied from tax week 7 in 2008/09. The new bandwidths are: 20% basic rate on taxable income between £0 and £36,000; and 40% higher rate on taxable income over £36,000. This means that a further issue of PAYE tax tables B to D is required to give effect to the new bands, to be used from the first pay date after 17 May 2008, backdated to the start of tax year. Employers must carry forward any tax code due to be operated on 5 April 2008 (ignoring week 1 or month 1 markings) to the new tax year on the employee’s payroll deduction record, including Forms P6 received too late to use in 2007/08. Employers must 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. For 2008/09, HMRC will have issued a new tax code for some but not all employees on Form P9 (T) (or code list or electronic communication). If two or more Forms P9 (T) has been sent, employers must use the one with the latest date of issue. If exceptionally, an employer receives a P9 (T) significantly later than the date from which it is to be applied, the HM Revenue & Customs issuing office should be contacted for confirmation of the code to be used. An employer must not change the tax code for an employee whose employment ends prior to the start of the new tax year, even if payment is actually made after that date. Instead, the employer must apply the old tax code. For 2008/09, the emergency code is revised to 543L. The PAYE tax threshold is set at £105 per week (£453 per month). For new employees taken on any time after 6 April 2008 and with a Form P45 for a tax year prior to 2007/08 or people taken on after 24 May 2008 and with a P45 for 2007/08 or earlier then the emergency code on a non-cumulative basis should be used. For new employees starting during the period 6 April and 24 May 2008, where the P45 is dated for 2007/08, use the code but uplift any tax code with a suffix ‘L’ by 21, ignoring any week 1/month 1 markings. Any amended code used by an employer should be entered at item 12 on Part 3 of Form P45. 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 >>