Changes to Thresholds and Tax Codes for 2015/16 – are you ready?

From 6th April 2015, the new tax year begins.  This years’ changes are listed below in a quick reference guide:

Headlines

The Personal Allowance has risen to £10,600, and the Basic Rate has reduced to £31,785.

Rate                            %                     Bandwith

Basic Rate                   20%                 £1 to £31,785

Higher Rate                 40%                 £31,786 TO £150,000

Additional Rate            45%                 £150,0001 and above

Changes to Income Tax Allowances

Personal Allowance                                  2014/15           2015/16           Change

Those born after 5 April 1948                       £10,000           £10,600          £600

Born between 6 April 1938 – 5 April 1948    £10,500           £10,600           £100

Those born before 6 April 1938                    £10,660           £10,660           -

National Insurance Contribution thresholds                                                         

                                                                    2014-15           2015/16

                                                                   £ per week   £ per week

Weekly Lower Earnings Limit (LEL)                111                  112

Weekly Primary Threshold (PT)                      153                  155

Weekly Secondary Threshold (ST)                 153                  156

Upper Earnings (UEL)                                    805                  815

Upper Profits Limit (UPL)                          41,865 pa        42,385 pa

Upper Secondary Threshold for U21s (*3)     N/A                  815

Employment Allowance (per employer)          2,000 pa          2,000 pa

*3 Upper Secondary Threshold (UST) introduced from April 2015 for employees under the age of 21.  The rate of secondary NICs for employees under the age of 21 on earnings between ST and UST will be 0%.

Class 1 National Insurance Contribution rates 2015-16

Employees (primary)                                  Employer (Secondary)

Earnings                  NIC rate                      Earnings        NIC rate

£ per week               per cent                     £ per week     per cent

Below £112                 0                                 Below £156     0

£112-155                     0                                Above £156    13.8

£155-815                     12

Above £815                2

Statutory Adoption Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     138.18             139.58

Statutory Maternity Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     138.18             139.58

Statutory Paternity Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     138.18             139.58

Additional statutory paternity pay        138.18             139.58

Statutory Shared Parental Pay

                                                          2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                    138.18             139.58

Statutory Sick Pay

                                                         2014-15           2015-16

Earnings Threshold                             111.00             112.00

Standard Rate                                     87.55              88.45

What does the letter on my tax code mean?

Tax codes are usually a combination of numbers and a letter.  The numbers relate to the personal allowances to be used when calculating the tax due on the earnings being paid through the payroll.  The letters also may be relevant to calculating the tax due.

 

Tax code with a suffix L

Capital letter LFor the tax year 2011/12, an individual under 65 is entitled to a personal allowance of £7,475 and is represented by a tax code of 747L. A tax code may be reduced from 747L if an employee receives benefits from their employer such as private medical cover or a company car. The tax code may also be reduced if an employee has income from a source other than their employer such as a pension or a second job.

At the beginning of the tax year all tax codes ending with an L will be automatically amended to reflect any change in personal allowance.  In April 2012, the basic personal allowance increases from £7,475 to £8,105.  All tax codes with a suffix of “L” will automatically be increased by 63 so that a code 747L will become 810L.

Tax code with a suffix T

A tax code with a suffix “T” means that HMRC consider that there are other items that may need to be reviewed as part of the tax code and they will issue a issue a notice of coding if it is appropriate to change the tax code.

Occasionally a “NT” tax code is issued which means that no tax will be deducted from the earnings.

Tax code with a suffix P

This letter is used for an individual aged 65-74 with a full personal allowance of £9,940 for 2011-12.

Tax code with a suffix Y

This letter is used for an individual over 75 with personal allowance of £10,090 in 2011-12.

Tax code BR

This tax code means that tax will be deducted at basic rate on all earnings.

Tax codes with a prefix D

Occasionally an employee may have a D0 tax code which means that all earnings from that employment are taxed at 40%.

If an employee has a D1 tax code this means that all earnings are taxed at 50%.

Tax code with a prefix K 

Capital letter KA tax code with a prefix of K means that an employee’s personal allowances are less than the benefits that they receive.  The benefits will be shown on the copy of the coding notice received by the employee and a “K” code is often required for those with a company car.

 

It is always worth checking that the tax code letter makes sense and to contact HMRC if there is any doubt about a coding notice received to check that it is correct.