Guidance

Software developers: PAYE update 20

Published 22 April 2016

Autumn Statement 25 November 2015 Income Tax and National Insurance changes from 6 April 2016.

1. Income Tax changes from 6 April 2016

Personal Allowance (all age groups) £11,000.
Minimum amount of Married Couple’s Allowance £3,220.
Blind Person’s Allowance £2,290.

The Income Tax rates and Income Tax bandwidths which will take effect from 6 April 2016 are:

• Basic Rate 20% Bandwidth £1 to £32,000
• Higher Rate 40% Bandwidth £32,001 to £150,000
• Additional Rate 45% Bandwidth £150,001 and above

Scottish Rate

• Scottish Basic Rate 20% Bandwidth £1 to £32,000
• Scottish Higher Rate 40% Bandwidth £32,001 to £150,000
• Scottish Additional Rate 45% Bandwidth £150,001 and above

Revised payroll software must be used from this date.

1.1 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(2016) ‘Tax codes to use from 6 April 2016’ a copy of which will be available on GOV.UK at Tax codes to use from 6 April 2016 in February 2016.

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 2015 to 2016 codes as follows:

• ‘L’ suffix codes – increase by 40; code 1060L becomes 1100L
• the PAYE threshold with effect from 6 April 2016 is raised to £212 per week (£917 per month)
• the code for emergency use with effect from 6 April 2016 is 1100L

1.2 Changes to tax tables from 6 April 2016

The new Taxable Pay Tables will be available during February/March 2016. 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 2016 or Tables B to D April 2016) 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 2016.

1.3 Summary of changes from 6 April 2016

The Income Tax personal allowance is increased to £11,000.
Tax rate bandwidths have changed.

1.4 Specification for PAYE Tax Table Routines

Amendments to the Specification for PAYE Tax Table 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 ‘2016/2017’ against ‘Income Tax Years’ and ‘06/04/2016’ against ‘Date from which effective’.

Parameter values to be effective from 6 April 2016.

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

B2 – Bandwidth 2 Changed to 32,000
C2 – Bandwidth 2 Cumulative Changed to 32,000
K2 – Annual Tax 2 Cumulative Changed to 6,400

B3 – Bandwidth 3 Changed to 118,000
C3 – Bandwidth 3 Cumulative 150,000 Unchanged
K3 – Annual Tax 3 Cumulative Changed to 53,600

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%

The equivalent Scottish parameters will use the same values as the rest of the UK for 2016 to 2017.

An updated version of this specification incorporating these amendments will be available soon but in the meantime, you may wish to make these amendments in any copies you currently hold and complete the ‘Incorporation of Amendments’ sheet at the back of the booklet.

1.5 Payroll test data

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

2. National Insurance changes from 6 April 2016

2.1 Class 1 National Insurance contributions (NICs)

In the Autumn Statement on 25 November 2015 the Chancellor announced the following 2016 to 2017 Class 1 NICs limits:

• Lower Earnings Limit £112 a week
• Primary Threshold £155 a week
• Secondary Threshold £156 a week
• Upper Earnings Limit £827 a week
• Upper Secondary Threshold £827 a week
• Apprentice Upper Secondary Threshold £827 a week

2.2 Summary of the National Insurance earnings limits, thresholds and rates

Class 1 NICs rates 2016 to 2017

2.3 National Insurance guidance for software developers, effective for the tax year 2016 to 2017

The 2016 to 2017 version of the technical specification will be available on GOV.UK shortly.

2.4 National Insurance Employment Allowance

From April 2016 the employment allowance, which many employers are eligible to claim where they have a secondary Class 1 NICs liability, will increase to £3,000 and limited companies where the director is the sole employee will be excluded from claiming the allowance. Further information is available at Employment Allowance.