Dealing with the Changed Personal Allowance

Newsletter issue - August 08.

The announcement by the Chancellor Alistair Darling about the changes to the personal allowance and the basic rate tax band for 2008/09 took HMRC by surprise as much as everyone else. It has taken a few months to work out how to tweak the PAYE system so everyone pays the right amount of tax in 2008/09.

HMRC have now decided not to reissue every single PAYE code. Instead employers will have to add 60 to every PAYE code that has an L suffix. This means code 543L will become 603L. For all other letter suffixes you must wait for a new PAYE code to be issued. L is the most frequently used suffix, so you as an employer are effectively doing HMRC's work, and picking up the costs incurred by the Chancellor's change of mind.

The new codes should be applied from the first payday on or after 7 September 2008. The PAYE tables, or your payroll computer system, will ensure that monthly paid employees, who are on the basic rate of tax will receive a tax reduction through the payroll of around £60 over the remainder of the tax year. This will normally reduce the employee's total tax deductions for the month, but in rare cases it will create a refund for the employee of tax he has paid earlier in the tax year.

Where a refund of tax is due you should deduct the amount needed to make the refund from the total of PAYE, NICs, CIS and student loans due to be paid over to HMRC for that period. If this total is not large enough to cover the refunds due to your entire workforce, you can ask for funding directly from HMRC. Do this by contacting the relevant HMRC Accounts Office by post or fax. You also need to inform the HMRC Accounts Office that there is no PAYE payment to make for the period, by telephoning 0845 366 7816 with your payroll details or online at:
http://www.hmrc.gov.uk/howtopay/paye_nil.htm

HMRC are sending out new PAYE tables and guidance to all employers included on an employers' CD-ROM in August. You will also be able to order paper versions of leaflets and forms from the HMRC orderline (08457 646 646) after 12 August. If you have any questions about how to treat new employees, dealing with student employees or related matters do ask us.

What our clients say about us...

  • "Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."

    ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT

  • "I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."

    Neil Price - Managing Director at Work Relief Charity Recruitment

  • "Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"

    Lee Westrap MBCS - Director - Bulldog IT Services

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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk