New coding changes for 2011/12
We have made some amendments to the PAYE Regulations which will come into effect from 6th April 2011. These involve changing the PAYE tax code we authorise you to operate in the following situations:
An employee starts working for you but does not provide a form P45
This will affect individuals who fail to complete a form P46 before their first payday. Currently where an employee fails to complete the P46 you complete it to the best of your knowledge, tick checkbox C and submit it to us to update their record and issue a tax code if necessary. In the meantime you are authorised to operate code BR on a cumulative basis. This can result in higher paid employees paying less tax than is due and an underpayment arising at the year end. From April 2011 we will be changing the code you will operate to 0T (zero allowances) instead of BR, so that the employee will pay tax at the basic, higher and additional rate as appropriate.
An employer makes a payment to an individual after leaving their employment
Currently the guidance says you have to deduct tax at BR on any payments made to an employee after the employment has ceased, if they have not been included in their form P45. If the individual is liable to tax at the higher or additional rate however this will result in an underpayment that we would need to collect from the employee. From April 2011 we will be changing the code we authorise you to operate from BR to 0T. Code 0T will ensure that tax is deducted from payments at the basic, higher and if appropriate the additional rate of tax.
An employer continues to make payments to an individual as an employee and then begins paying them a pension.
It is becoming commonplace for employees to begin receiving occupational pension payments whilst continuing in employment with their existing employer. In this event the current guidance instructs you to continue using the same tax code against the individual’s employment income until we issue a new code. We also tell you to operate the same tax code against the pension payments on a Week 1/Month 1 basis. This can result in the employee receiving more personal allowances than they should and an underpayment of tax arising at the tax year end. To remedy this, from April 2011 the authorised code to be operated against the occupational pension receipts will be changed to code 0T where the employee continues to work for you.
Detailed employer guidance regarding the uncompleted P46 will be included in the E13 ‘Day to day Payroll’ helpbook. The other changes will be included in the CWG2 ‘Employers Further Guide to PAYE and NICs’. The 2011 version of these helpbooks will be published online in February 2011.
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Employer CD-ROM 2010: November 2010 critical Update
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