What to do about the new personal allowance
In May, the government announced a one-off £600 increase to the personal tax-free allowance (PA) for 2008/09 on top of the normal inflationary increase, bringing the PA to £6,035. This unique payment followed on the political furore surrounding thescrapping of the 10p tax band – and it will be causing payroll agents a few headaches when they come to implement it.
The allowance must be calculated in monthly pay packets as from 7 September (although its effects will be backdated to 6 April) and HMRC has just published guidelines to explain the impact for both individuals and employers. Payroll agents will face extra work in that month in changing all employees’ tax codes to make allowances for the extra tax-free amount. The basic L-codes will see the least change, with 60 added to the existing tax code number. All other tax codes will only be subject to change if HMRC send out a P6 notice in respect of that code.
In a perhaps not unrelated piece of news, HMRC have also announced that they will be deferring the implementation of their new internal PAYE Service and Work Management System. This new single, national computer system, which does not affect existing PAYE tax law in any way, had been planned for rolling out in October 2008, but HMRC are now stating that the system “will only go ‘live’ when we are satisfied that the changes will deliver the expected benefits and not cause unnecessary disruption.”