Guidance

Software developers: PAYE update 21

Published 7 March 2017

1 Autumn Statement 23 November 2016

Income Tax changes from 6 April 2017:

• Income Tax changes
• changes in tax coding
• changes to tax tables from 6 April 2017
• summary of changes from 6 April 2017
• specification for PAYE Tax Table routines
• payroll test data

1.1 National Insurance changes from 6 April 2017

• Class 1 National Insurance Contributions (NICs)
• National Insurance guidance for software developers, effective for the tax year 2017 to 2018
• summary of the National Insurance earnings limits, thresholds and rates

1.2 Income Tax changes

• Personal Allowance (all age groups, for the whole of the UK) £11,500
• minimum amount of Married Couple’s Allowance £3,260
• Blind Person’s Allowance £2,320

The Income Tax rates and Income Tax bandwidths which will take effect from 6 April 2017 are:

• basic rate 20% bandwidth £1 to £33,500
• higher rate 40% bandwidth £33,501 to £150,000
• additional rate 45% bandwidth £150,001 and above

Scottish Rate:

• Scottish basic rate 20% bandwidth £1 to £31,500
• Scottish basic rate 40% bandwidth £31,501 to £150,000
• Scottish additional rate 45% bandwidth £150,001 and above

Revised payroll software must be used from this date.

1.3 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(2017) ‘Tax codes to use from 6 April 2017’ a copy of which will be available on GOV.UK at Tax codes to use from 6 April 2017 in February 2017.

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 2016 to 2017 codes as follows:

• ‘L’ suffix codes – increase by 50 (code 1100L becomes 1150L)
• the PAYE threshold with effect from 6 April 2016 is raised to £221 per week (£958 per month)
• the code for emergency use with effect from 6 April 2017 is 1150L

1.4 Changes to Tax Tables from 6 April 2017

The new Taxable Pay Tables will be available during March 2017. 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 (Tables B to D April 2017) 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 2017.

Summary of changes from 6 April 2017:

• the Income Tax Personal Allowance is increased to £11,500
• tax rate bandwidths have changed

1.5 Specification for PAYE Tax Table Routines

Amendments to the Specification for PAYE Tax Table Routines, Version 15 Issued October 2016.

The following are the changes to the parameter values to be added to Appendices A and B of the Specification for PAYE Tax Table Routines, Version 15 Issued October 2016. Use the first blank column and on each blank page enter the heading ‘2017/2018’ against ‘Income Tax Years’ and ‘06/04/2017’ against ‘Date from which effective’.

Appendix A: Parameter values to be effective from 6 April 2017.

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

B2 – Bandwidth 2 Changed to 33,500
C2 – Bandwidth 2 Cumulative Changed to 33,500
K2 – Annual Tax 2 Cumulative Changed to 6,700

B3 – Bandwidth 3 Changed to 116,500
C3 – Bandwidth 3 Cumulative 150,000 Unchanged
K3 – Annual Tax 3 Cumulative Changed to 53,300

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%

Appendix B: Parameter values to be effective from 6 April 2017.

SB1 – Bandwidth 1 0 Unchanged
SC1 – Bandwidth 1 Cumulative 0 Unchanged
SK1 – Annual Tax 1 Cumulative 0 Unchanged

SB2 – Bandwidth 2 Changed to 31,500
SC2 – Bandwidth 2 Cumulative Changed to 31,500
SK2 – Annual Tax 2 Cumulative Changed to 6,300

SB3 – Bandwidth 3 Changed to 118,500
SC3 – Bandwidth 3 Cumulative 150,000 Unchanged
SK3 – Annual Tax 3 Cumulative Changed to 53,700

SR1 – Rate 1 10% Unchanged
SR2 – Rate 2 20% Unchanged
SR3 – Rate 3 40% Unchanged
SR4 – Rate 4 45% Unchanged

G1 – Gpointer 2
M – Maxrate 50.00%

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.

1.6 Payroll test data

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

2 Class 1 NICs

In the Autumn Statement on 23 November 2016 the Chancellor announced the following:

2017 to 2018 Class 1 NICs limits:

• Lower Earnings Limit £113 a week
• Primary Threshold £157 a week
• Secondary Threshold £157 a week
• Upper Earnings Limit £866 a week
• Upper Secondary Threshold £866 a week
• Apprentice Upper Secondary Threshold £866 a week

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

Class 1 NICs rates 2017 to 2018

2.3 National Insurance guidance for software developers, effective for the tax year 2017 to 2018

The 2017 to 2018 version of the technical specification is available on GOV.UK.

2.4 National Insurance Employment Allowance

For 2017 to 2018 the employment allowance, which many employers are eligible to claim where they have a secondary Class 1 NICs liability, will remain at £3,000. Further information on the Employment Allowance is available on GOV.UK.