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Changes to the Personal Allowance in September 2008
Following the Chancellor's announcement, the basic Personal Allowance for the 2008-09 tax year is increasing by £600 from £5,435 to £6,035 and the basic rate limit is reducing from £36,000 to £34,800.
As a result, many employees will see their tax code change from 7 September 2008.
The table below summarises the changes you'll need to make to your employees' tax codes. You must update codes with an L suffix without waiting for an individual P6 notice from HMRC. You should leave other codes unchanged unless they send you a P6.
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Type of tax code |
Action |
|
L suffix |
Add 60 to the existing tax code number. For example, old tax code 543L becomes 603L. |
|
T suffix |
Only change the tax code when HMRC send you a P6 notice. |
|
P, V or Y suffix |
Do not change these tax codes unless HMRC send you a P6 notice. |
|
A or H suffix |
These are no longer used, so contact your HMRC office immediately if you have any of these tax codes. |
|
NT, BR or D0 |
Do not change these tax codes unless HMRC send you a P6 notice. |
|
K prefix |
Only change the tax code when HMRC send you a P6 notice. |
The effect of the changes on employees' pay
Employees paid on a monthly basis will receive around £60 extra in September followed by an additional £10 a month until the end of the tax year.
Employees paid weekly should see an increase in their pay for the week starting 7 September of around £53, followed by an extra £2.30 each week for the remainder of the tax year.
For employees who have paid less than £60 tax by the end of August this year, the September increase in pay will match the tax they've paid to date.
Note to business-owners
Owners of limited companies who take their income in dividends are advised to increase their annual salary to £6,035 to take advantage of the tax-free allowance for this tax year.
New self-assessment deadline for paperless returns – 31 October
If you are sent a notice to complete a tax return before or on 31 July and you want to submit a paper return you must send the completed return back by 31 October.
If you are sent a notice to complete a tax return after 31 July you must send the completed paper tax return back by the later of 31 October or three months following the date of issue of the notice.
For paper returns that reach them by this date HMRC will:
- calculate your tax for you (though you can calculate it for yourself if you want)
- tell you what to pay by the following 31 January
- collect tax through your tax code (if possible) where you owe less than £2,000 unless you tell them otherwise.
If the paper return arrives after this deadline you'll be charged an automatic £100 penalty.
Late Partnership returns attract a £100 penalty for each partner. Late Trust and Estate returns result in a £100 charge to the trust or estate.
There are a very few cases where online tax returns can't be made. In these cases the deadline by which the paper return must reach HMRC is 31 January.
Click here to find out more.
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