Guidance

Software developers: PAYE update 18

Published 25 March 2015

1. Autumn Statement 3 December 2014

Income Tax changes from 6 April 2015:

• Income Tax changes
• changes in tax coding
• changes to tax tables from 6 April 2015
• summary of changes from 6 April 2015
• specification for PAYE tax table routines
• payroll test data

National Insurance changes from 6 April 2015:

• Class 1 National Insurance Contributions (NICs)
• NI Guidance for Software Developers, effective for the tax year 2015-16
• summary of the National Insurance earnings limits, thresholds and rates

Income Tax changes:

• Personal Allowance for people born after 5 April 1948 £10,600
• Personal Allowance for people born before 6 April 1938 £10,660
• Married Couple’s Allowance (born before 6 April 1935) aged 81 and over £8355
• these age related allowances are subject to an income limit which will increase to £27,700
• minimum amount of Married Couple’s Allowance £3220
• Blind Person’s Allowance £2290

The Income Tax rates and Income Tax bandwidths which will take effect from 6 April 2015 are:

• Basic Rate 20% Bandwidth £1 to £31785
• Higher Rate 40% Bandwidth £31786 to £150,000
• Additional Rate 45% Bandwidth £150,001 and above
• revised payroll software must be used from this date

2. Changes in tax coding

There will be a general uplift of tax codes with suffix ‘L’. Full instructions will be issued to employers on form P9X(2015) ‘Tax codes to use from 6 April 2015’ a copy of which will be available on the HM Revenue and Customs website at Tax codes to use from 6 April 2015 in February 2015.

As a general rule, unless an amended code notification has been received on a form P9 (T) (or an internet or Electronic Data Interchange equivalent) employers should amend 2014-15codes as follows:

• ‘L’ suffix codes – increase by 60, code 1000L becomes 1060L
• the PAYE threshold with effect from 6 April 2015 is raised to £204 per week (£883 per month)
• the code for emergency use with effect from 6 April 2015 is 1060L

2.1 50% Overriding Limit

From 6 April 2015 the 50% overriding limit will be extended to all tax codes. Currently this applies to K codes only, the change means that from 6 April 2015 the basis of operation for K codes will apply to all codes.

2.2 Changes to Tax Tables from 6 April 2015

The new Taxable Pay Tables will be available during February/March 2015. The Tax Tables are available in easy to print format so if you need a paper copy you can help us to keep costs down by printing one off.

These tables (calculator tables April 2015 or tables B to D April 2015) give effect to the revised Income Tax rates and bandwidths, and are brought into use from the first pay-day on or after 6 April 2015.

2.3 Summary of changes from 6 April 2015

• the Income Tax personal allowance is increased to £10,600
• tax rate bandwidths have changed

2.4 Specification for PAYE tax table routines

Amendments to the specification for PAYE tax able routines, version 13 issued October 2014.

The following are the changes to the parameter values to be added to appendix a of the specification for PAYE tax table routines, version 13 issued October 2014. Use the first blank column and on each blank page enter the heading ‘2015 to 2016’ against ‘Income Tax years’ and 6 April 2015 against ‘date from which effective’.

Parameter values to be effective from 6 April 2015.

B1 – Bandwidth 1 0 Unchanged
C1 – Bandwidth 1 Cumulative 0 Unchanged
K1- Annual Tax 1 Cumulative 0 Unchanged

B2 – Bandwidth 2 Changed to 31785
C2 – Bandwidth 2 Cumulative Changed to 31785
K2 – Annual Tax 2 Cumulative Changed to 6,357

B3 – Bandwidth 3 Changed to 118,215
C3 – Bandwidth 3 Cumulative Changed to 150,000 Unchanged
K3 – Annual Tax 3 Cumulative Changed to 53,643

R1 – Rate 1 10% Unchanged
R2 – Rate 2 20% Unchanged
R3 – Rate 3 40% Unchanged
R4 – Rate 4 45% Unchanged

G – Gpointer 2
M – Maxrate 50.00%

Please complete the ‘incorporation of amendments’ sheet at the front of the booklet showing that the above amendments have been made.

2.5 Payroll test data

The Software developers: payroll test data will be updated shortly.

2.6 Class 1 NICs

In the Autumn Statement on 3 December 2014 the Chancellor announced the following:

2015 to 2016 Class 1 NICs limits:

• Lower Earnings Limit £112 a week
• Secondary Threshold £156 a week
• Primary Threshold £155 a week
• Upper Accruals Point will remain unchanged at £770 a week
• Upper Earnings Limit £815 a week

From April 2015 the contracted-out rebates are confirmed as follows:

• Contracted-out Salary Related Schemes (COSR)
• 3.4% for employers and 1.4% for employees

2.7 National Insurance guidance for software developers, effective for the tax year 2015-16

The 2015 to 2016 version of technical specification will be available before the end of December.

2.8 National Insurance Employment Allowance

Individuals who employ certain carers will be able to claim the NICs Employment Allowance from April 2015. As a result, they will be able to reduce their NICs bill by up to £2,000 a year. Further information is available at Employement Allowance here.(NB: Employment Allowance is only being extended to certain carers – eg not nannies.)