PayPerShop Forum

Hi all you gurus

In previous years the PAYE thresholds have not been implemented until week 7, month 2 of the payroll year. I have not been able to locate any rules saying something different should happen this year, but it seems to me likely that with losing the 10% rate, the new thresholds should take effect from April 6th, week 1. Any thoughts?

Regards

Mike Steer

Hi Mike,

My understanding is that the new tax rates will apply from 6 April, using the existing basic rate threshold. The increase in the thresholds from week 7 / month 2.

http://www.paypershop.com/news-cat/prebudget-2007-257.html

Thanks for the pointer Keith, that is just what I needed.

Mike

Hi Mike,

Yes, your thoughts are absolutely correct. The tax rates came out of the Pre Budget Report and hence must be applied from April 6th, so its 20% up to £34,600 and 40% thereafter.

The new £36k threshold was announced in the budget and therefore cannot be applied until it has been officially notified and since HMRC has an agreement over the amount of notice to be given to employers and software developers it cannot be applied until week 7/month 2 but, as Keith said, it is backdated to April 6th anyway.

As far as most of us are concerned it is a bit of a farce and I have asked that the professional bodies support a formal call for this to be changed. I have no illusions about it being successful but I think we need to keep pressing and if people like yourself would summarise the cost of this continuing duel process we might eventually get some common sense.

Ian Whyteside

Ian

Thanks for your response, welcome as ever. Sorry not to have acknowledged earlier but I have been on a jolly to La Belle France over Easter.

I feel that my limited programming skills are about to be tested to bursting point with the introduction of a compulsory IR mark in each and every XML submission wef April 2009. I am not floating this as a new topic on the forum yet, but if you know (or indeed anyone reading this knows) of someone with experience of the algorithm for creating this mark, I would be grateful to hear.

Regards

Mike

HMRC have written to us querying the tax we deducted, as shown on the P45s of three Month 1 leavers whose pay went into the 40% bracket.

We have calculated that the tax HMRC claim should have been deducted was based on the 2008-9 thresholds.

We have replied that 2008-9 thresholds came into effect after the April pay date of these three workers, and that our tax calculations are correct.

(This reply is inaccurate - please see corrected details in my posting below)

Mike, I'm not quite clear which 40% threshold you used to calculate the April payroll - was it £36,000 (the threshold in force from 6 April) or £34,800 (the threshold that is to be applied from 7 September but which will apply retrospectively to 6 April)?

If it was the £36,000 threshold, that must be correct as payroll systems should have met the statutory rules and those, in April, included the £36,000 threshold. There is no statutory basis for the £34,800 threshold until the Finance Act is passed. It means, of course, that the employees concerned will be due a tax refund if they are on cumulative codes with their employers in September, or from HMRC if they are not in employment or are on non-cumulative codes.

If it was the £34,800 threshold, that was wrong, although it will mean that they will not get a refund in September or HMRC will not need to make a refund. A "smack on the wrist" is probably in order, but there is no harm done.

Hi Ian

In an earlier posting on this topic, Ian Whyteside said:

The new £36k threshold was announced in the budget and therefore cannot be applied until it has been officially notified and since HMRC has an agreement over the amount of notice to be given to employers and software developers it cannot be applied until week 7/month 2 but, as Keith said, it is backdated to April 6th anyway.

This posting reinforced our understanding that while the 10% rate was to be dropped and the BR reduced to 20% with effect from April 6th, the 40% threshold would not be adjusted until the following month, or week 7 for weekly paid workers.

As the P45s in question were issued at the end of Month 1, we had not at that time implemented the 36K threshold and were still using the previous year's 40% threshold. HMRC's calculations for these P45 tax figures were made using the £36k threshold, hence the discrepancy between HMRCs calculations and ours.

I am still unsure which of us has got it right...

Mike, quite right, please ignore my previous message, the 2007/08 threshold, £34,600, was in use until week 7/month 2 and, at that time it was increased to £36,000. So, your calculation in month 1 should have used only the 20% and 40% rates, which it did, and the £34,600 threshold, which it did. So, I can see nothing wrong with your month 1 calculation.

So, a smack on the wrist for me! And for HMRC!

If you wish to follow this up with HMRC, the Taxable Pay Tables that were in use from April 6, and the replacement Tables that came into use from week 7 are both on the current CD-ROM, so the situation is quite clear.

Your input is appreciated Ian

I find it a tad unnerving to be at odds with HMRC, so your endorsement of our methods in this instance is very welcome, many thanks.

Mike