Guidance

Software developers: PAYE update 24

Published 28 April 2020

The information in this update is taken from the:

  • UK Budget Statement 11 March 2020
  • Scottish Draft Budget 6 February 2020
  • Welsh Draft Budget 16 December 2019

1. Income Tax changes from 6 April 2020

  • personal allowance (all age groups, for the whole of the UK) £12,500 (unchanged)
  • minimum amount of married couple’s allowance £3,510
  • blind person’s allowance £2,500

The Income Tax rates, bandwidths and flat rate tax codes (where applicable) from 6 April 2020 are:

  • English and Northern Irish basic rate 20% bandwidth £1 to £37,500 BR (unchanged)
  • English and Northern Irish higher rate 40% bandwidth £37,501 to £150,000 D0 (unchanged)
  • English and Northern Irish additional rate 45% bandwidth £150,001 and above D1 (unchanged)
  • Scottish starter rate 19% bandwidth £1 to £2,049 (*unchanged)
  • Scottish basic rate 20% bandwidth £2,050 to £12,444 SBR (*unchanged)
  • Scottish intermediate rate 21% bandwidth £12,445 to £30,930 SD0 (*unchanged)
  • Scottish higher rate 41% bandwidth £30,931 to £150,000 SD1 (*unchanged)
  • Scottish top rate 46% bandwidth £150,001 and above SD2 (*unchanged)
  • Welsh basic rate 20% bandwidth £1 to £37,500 CBR (unchanged)
  • Welsh higher rate 40% bandwidth £37,501 to £150,000 CD0 (unchanged)
  • Welsh additional rate 45% bandwidth £150,001 and above CD1 (unchanged)

*The Scottish Income Tax rates, bandwidths and flat rate tax codes (where applicable) from 11 May 2020 are:

  • Scottish starter rate 19% bandwidth £1 to £2,085
  • Scottish basic rate 20% bandwidth £2,086 to £12,658 SBR
  • Scottish intermediate rate 21% bandwidth £12,659 to £30,930 SD0
  • Scottish higher rate 41% bandwidth £30,931 to £150,000 SD1 (unchanged)
  • Scottish top rate 46% bandwidth £150,001 and above SD2 (unchanged)

Revised payroll software must be used from 11 May 2020.

1.1 Changes in tax coding

Due to no change to the personal allowance, no general uplift is required of tax codes with suffixes ‘L’, ‘M’ and ‘N’. Full instructions have been issued to employers on form P9X(2020) Tax codes to use from 6 April 2020.

As a general rule, unless an amended code notification has been received on a form P6 or form P9(T), employers should carry over the 2019 to 2020 tax codes but not the week 1 or month 1 markings.

Any Scottish tax codes that are issued as a result of the Scottish Draft Budget for 2020 to 2021, will be operative from 11 May 2020. Information on this later operative date has been issued to employers on form P7X(2020) Tax codes to use following the Budget.

The PAYE threshold from 6 April 2020 is £240 per week (£1,042 per month) (unchanged).

The code for emergency use from 6 April 2020 is 1250L (unchanged).

1.2 Changes to tax tables from 6 April 2020

The new Taxable Pay Tables (Tables B to D April 2020) are available online in easy to print format.

These tables give the revised Income Tax rates and bandwidths (unchanged for England and Northern Ireland and Wales) and are used from the first pay-day on or after 6 April 2020. Revised Scottish Income Tax rates and bandwidths are used for the first pay-day on or after 11 May 2020. 2019 to 2020 Scottish Income Tax rates and bandwidths continue to apply up to and including 10 May 2020.

1.3 Specification for PAYE Tax Table Routines

The following changes were made to the parameter values in appendices A, B and C of the Specification for PAYE Tax Table Routines Version 18.0 (March 2020).

Appendix A: Parameter values from 6 April 2020

B1 – bandwidth 1 0 unchanged
C1 – bandwidth 1 cumulative 0 unchanged
K1 – annual tax 1 cumulative 0 unchanged

B2 – bandwidth 2 37,500 unchanged
C2 – bandwidth 2 cumulative 37,500 unchanged
K2 – annual tax 2 cumulative 7,500 unchanged

B3 – bandwidth 3 112,500 unchanged
C3 – bandwidth 3 cumulative 150,000 unchanged
K3 – annual tax 3 cumulative 52,500 unchanged

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 from 6 April 2020

SB1 – bandwidth 1 2,049 unchanged
SC1 – bandwidth 1 cumulative 2,049 unchanged
SK1 – annual Tax 1 cumulative 389.31 unchanged

SB2 – bandwidth 2 10,395 unchanged
SC2 – bandwidth 2 cumulative 12,444 unchanged
SK2 – annual tax 2 cumulative 2,468.31 unchanged

SB3 – bandwidth 3 18,486 unchanged
SC3 – bandwidth 3 cumulative 30,930 unchanged
SK3 – annual tax 3 cumulative 6,350.37 unchanged

SB4 – bandwidth 4 119,070 unchanged
SC4 – bandwidth 4 150,000 unchanged
SK4 – annual tax 4 cumulative 55,169.07 unchanged

SR1 – rate 1 19% unchanged
SR2 – rate 2 20% unchanged
SR3 – rate 3 21% unchanged
SR4 – rate 4 41% unchanged
SR5 – rate 5 46% unchanged

G1 – Gpointer 2
M – Maxrate 50.00%

Appendix B: parameter values from 11 May 2020

SB1 – bandwidth 1 changed to 2,085
SC1 – bandwidth 1 cumulative changed to 2,085
SK1 – annual Tax 1 cumulative changed to 396.15

SB2 – bandwidth 2 changed to 10,573
SC2 – bandwidth 2 cumulative changed to 12,658
SK2 – annual tax 2 cumulative changed to 2,510.75

SB3 – bandwidth 3 changed to 18,272
SC3 – bandwidth 3 cumulative 30,930 unchanged
SK3 – annual tax 3 cumulative changed to 6,347.87

SB4 – bandwidth 4 119,070 unchanged
SC4 – bandwidth 4 cumulative 150,000 unchanged
SK4 – annual tax 4 cumulative changed to 55,166.57

SR1 – rate 1 19% unchanged
SR2 – rate 2 20% unchanged
SR3 – rate 3 21% unchanged
SR4 – rate 4 41% unchanged
SR5 – rate 5 46% unchanged

G1 – Gpointer 2
M – Maxrate 50.00%

Appendix C: Parameter values from 6 April 2020

WK1 – annual tax 1 cumulative 0 unchanged
WK2 – annual tax 2 cumulative 7,500 unchanged
WK3 – annual tax 3 cumulative 52,500 unchanged

WR1 – rate 1 10% unchanged
WR2 – rate 2 20% unchanged
WR3 – rate 3 40% unchanged
WR4 – rate 4 45% unchanged

G2 – Gpointer 2
M – Maxrate 50%

2. Class 1 National Insurance contributions (NICs) changes from 6 April 2020

In the UK Budget on 11 March 2020 the Chancellor announced the following 2020 to 2021 Class 1 NICs limits:

  • Lower Earnings Limit £120 a week
  • Primary Threshold £183 a week
  • Secondary Threshold £169 a week
  • Upper Earnings Limit £962 a week unchanged
  • Upper Secondary Threshold £962 a week unchanged
  • Apprentice Upper Secondary Threshold £962 a week unchanged

2.1 National Insurance earnings limits, thresholds and rates

Class 1 NICs rates 2020 to 2021

2.2 National Insurance guidance for software developers

This technical specification has been updated for the 2020 to 2021 tax year.

2.3 National Insurance Employment Allowance

For 2020 to 2021 the Employment Allowance, which many employers are eligible to claim where they have a secondary Class 1 NICs liability, will increase to £4,000.