Filing deadlines
We are approaching a number of important filing deadlines that will apply to businesses who operate a payroll. We have summarised the main key dates below. If you have any problems meeting these dates we may be able to help.

19 May 2008 - Last date for your 2007-08 forms P14, or substitutes, and P35 to reach your HM Revenue & Customs office. You have until midnight on the 19th to file your Return. Penalties are chargeable on any Returns received after this date.

31 May 2008 - Last date for giving a 2007-08 form P60 to each employee who was working for you at 5 April 2008.

6 July 2008 - Last date for your 2007-08 forms P9D and forms P11D, or substitutes, to reach your HM Revenue & Customs office. These forms show details of ‘benefits in kind’ provided to employees, such as company cars or private healthcare.

6 July 2008 - Return of Class 1A NICs on form P11D(b) for 2007-08 to reach your HM Revenue & Customs office. (penalties will be charged automatically on any Returns not received by 19 July 2008)

6 July 2008 - Giving a copy of the 2007-08 form P9D, P11D, or equivalent information, to each relevant employee.

18 July 2008 - If you are not subject to the mandatory electronic payment rules and you post your payment, you should pay all outstanding Class 1A NICs so your payment reaches HMR&C no later than 18 July. Interest will be charged on any payments received after this date (and surcharge in the case of employers who are subject to the mandatory electronic payment rules).

22 July 2008 - Last date for any outstanding 2007-08 Class 1A NICs payments to be cleared in HMR&C’s bank account if you pay by an approved electronic payment method. Interest will be charged on any payments received after this date (and surcharge in the case of employers who are subject to the mandatory electronic payment rules).

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Employees and employers receive periodic updates to tax code numbers. This number is used by your employer/pension provider to calculate the amount of tax you are stopped on your salary and/or pension.

If your affairs are straight forward (and you are not able to claim certain age related allowances) you are entitled to earn the first £5,225 of your income in 2007-2008, tax free. If this were the case your code number would be 522L.

If your code number drops, to say 200L, you will pay more tax each pay period. If the tax code increases, you will pay less tax. (But see note on K codes below.)

We have listed below a number of generalised factors that may affect your code number. The list is not comprehensive so do contact us if you receive a code number adjustment that is difficult to understand.

1. Reduction for unpaid tax in earlier years. If you had underpaid tax in the tax year to 5 April 2006 by say £500 the Revenue will allow you, in certain circumstances, to pay the tax back in a following tax year. To facilitate this, the Revenue will deduct an amount from your tax code. For instance if you are a standard rate tax payer, currently 22%, your tax allowances would need to be reduced by £2,272 to effectively recover the £500 you owe. (For those of you who like to see the maths this is calculated by dividing £500 by 22 and multiplying the result by 100 = £2,272). On your notice of coding you would see a reduction in your code number from say 522L to 295L. (522-227).

2. Reduction for benefits provided by employer. If your employer provides you with a company car, or private medical insurance, or indeed any other form of benefit, without an adjustment to your tax code you would always owe the Revenue the tax on the benefit at the end of each tax year. So that this does not happen your code number will be reduced accordingly. The reduction works by deducting the value of the benefit from your code; thus a benefit of £500 will result in a reduction in your code number of £500, i.e. 50 points.

3. Reduction for higher rate tax payers. If your earnings are part subject to tax at 40%, and they include significant interest received or dividend income, you will owe the higher rate tax on your investment income at the end of the tax year. To counter this the estimated higher rate tax on your non-salaried/pensionable income will be recovered by reducing your tax code. As your interest and dividends received are taxed at the basic rate, only the marginal increase above the tax already deducted will be taken into account.

What happens if the reduction in your code number is more than your present code?

K Codes - If your tax free allowance of £5,225 is reduced by £2,272, as in example 1 above, you will still have a positive tax code of 295L. If however the deduction from your tax allowance is £10,000 you will have changed a positive tax free deduction of £5,225 into a negative position of -£4,775. This “negative deduction” is actually taxable income. Instead of receiving a tax free allowance of £5,225 you are being taxed on additional income of £4,775.

Your tax code could be changed from 522L to -477L. In their wisdom the Revenue have chosen to display -477L as K477. When you see a tax code prefixed by the letter “K” add on a zero and this is the equivalent income being added to your tax assessment for the year. The larger the K code, the more tax you will pay - although the revenue cannot take more than 50% of your salary in tax in this way!

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