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Tax changes for your staff

As an employer you need to ensure your practice is fully prepared for the upcoming changes in the tax rates, says Rosemary Smith

As an employer you need to ensure your practice is fully prepared for the upcoming changes in the tax rates, says Rosemary Smith

It is crucial that you are alert to the changes in the tax rates that are about to take place and that you remain on top of the changes by staying in regular contact with your tax advisors.

Now confirmed

HMRC has confirmed that changes to the personal allowance and basic rate tax band will take effect from 7th September 2008.

The Chancellor announced back in May this year, as a way of compensating people for the abolishment of the 10p tax rate, that the basic personal allowance was set to increase by £600 from £5,435 to £6,035 and the basic rate limit was reducing from £36,000 to £34,800.

Although these changes will take effect from 7th September 2008, these changes are effectively backdated to the start of the 2008/09 tax year.

This means most basic-rate taxpayers who are paid monthly should pay around £60 less tax in their September pay packet and £10 every month following until the end of the tax year.

Or, if they are paid weekly, they should pay around £53.00 less tax in their first pay packet after 7th September, and £2.30 less a week for the remainder of the tax year.

Higher-rate taxpayers are unaffected.

What you need to action

All employers should have already received a letter from HMRC in July detailing what needs to be done and informing you:

• To ensure that for every employee you have a P11 Deductions Working Sheet (P11) or equivalent record;

• Which employees' tax codes you can change yourself; and

• To apply any tax code changes that you get dated 23 August or earlier.

All these changes need to be made to the payroll records to meet the 7th September 2008 deadline.

HMRC have also included an extensive section on their website at to take you through the changes.

Employers will be sent a revised Employer CD ROM with all the relevant calculators and tax tables along with Employer Bulletin issue 30 later this month.

If you use payroll software, it must be up to date to apply these changes.

Make sure that you have received an update from your software provider before 7 September 2008 which incorporates these changes.

Finally, a couple of points to bear in mind

• HMRC is extensively upgrading its online Return and Forms part of the PAYE system at the end of October and this will mean that you will not be able to file in-year forms for a short five day period from 22nd to 27th October.

As part of the upgrade HMRC will be deleting all information sent in before 6th April 2005 that was stored but not submitted.

It is recommended that if you need any of your information saved make sure you either print it off or save it on your own system. More information on this can be found on the HMRC website at

• HMRC is introducing a new A4 version of the P45 in October so in future you will be able to simply print them out rather than using HMRC stationery.

• It will now ask for ‘Date of Birth' and ‘Gender', which must be filled in from 6th April 2009.

Rosemary Smith is healthcare manager with Tenon, the UK's third largest medical accountant

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