Tax Update (August 2008)
September Tax Changes
Businesses have to update their payroll systems twice a year -
in April and May. This year, to amend the mistake by the Government
regarding the 10p tax band, Alistair Darling announced a third
change, planned for the 7th of September. This will affect over a
million small businesses that need to prepare for the change at a
time when many payroll staff are on holiday.
The 10p tax band was abolished from the 6th of April, resulting
in a large increase in tax for many people on low incomes. This
proved so overwhelming that, on the 13th of May, the Chancellor
announced further changes to reduce the burden on poorer families.
In the meantime, an increase in the basic rate tax bandwidth took
place on May the18th. Each of these changes affects employers, who
are responsible for calculating and deducting income tax from their
employees' wages.
Employers need to be aware of the changes, the increase in tax
codes and a decrease in the basic rate bandwidth.
Employers using a payroll software package should check whether
their supplier will supply an update under their support contract.
Employers using manuals from HM Revenue and Customs may have to
wait until the end of August for updated versions. Employers using
an online payroll service or a bureau can expect the changes to be
made for them, but it wouldn't hurt to check that this is being
done.
On the 21st of July HMRC has, as planned, begun to
issue information to employers about the changes they need to make
to payroll systems to implement the increase to personal allowances
in September.
The information confirms that:
- employers must apply any tax code changes that they get dated
23rd August or earlier
- they should change existing tax codes following the last payday
on or before the 6th of September in line with the
instructions provided in the letter i.e. an uplift of 60 points for
L suffix codes
Please read legal information.