Income Tax – PAYE Regulations
HMRC have published amendments to the PAYE regulations announced as part of the Budget to make it clear that payments under employee share plans after employment has ceased will continue to be taxed under the Basic Rate (BR) PAYE code.
The PAYE regulations had been amended with effect from 6 April 2011 to help ensure that tax is deducted under PAYE at the higher and additional rates of tax where appropriate rather than just at the basic rate.
The new regulations define the ‘0T’ and ‘additional rate’ income tax codes. The 0T code will deduct income tax at the basic, higher and additional rates depending on the level of income in question, without giving any personal allowances. The additional rate income tax code will deduct tax at 50% only. The 0T code should be used rather than the BR code in certain circumstances, including payments made to former employees after the P45 has been issued.