PAYE and NICs rates and limits for 2009–10

This booklet gives details of:

  • Pay As You Earn (PAYE) thresholds and rates
  • Mileage payments
  • Class 1 National Insurance rates and earnings limits
  • Class 1A National Insurance rate
  • Class 1B National Insurance rate
  • Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) rates
  • funding of SMP, SPP and SAP
  • National Minimum Wage
  • collection of Student Loans.

We will send you an Employer CD-ROM in February each year which includes up to date rates and allowances followed by an updated version of the CD-ROM in April/May.

If any rates change as a result of the Budget you will find a revised edition of this helpbook in the ‘Forms & Helpbooks’ section of the updated edition of your Employer CD-ROM. Alternatively, you can view a copy of the revised helpbook or you can order a paper copy from the Employer Orderline on 08457 646 646.

If you use payroll software you will need to make sure that this has been updated to incorporate the new rates and limits included in this helpbook.

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Contents

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Pay As You Earn (PAYE)

Thresholds

The PAYE thresholds (the level of earnings at which tax becomes payable) are:

  • £125.00 weekly
  • £540.00 monthly

Rates

The tax rates are:

  • basic rate - 20 per cent up to £37,400
  • higher rate - 40 per cent over £37,400

Tax codes starting with a K have a regulatory limit of 50 per cent.

The regulatory limit is specified as a percentage of pay and so on, and restricts the amount of tax to be deducted from the pay in the period. Where, for example, pay in the period is very low and the normal operation of the K code would give rise to a very high tax liability, possibly even exceeding the pay and so on in the period, the overriding regulatory limit will apply.

Emergency tax code

The emergency tax code is 647L.

Deciding which tax code to use

Use the information in Step 3 below together with the guidance at Step 3 of Helpbook E13 Day-to-day payroll, ’A new employee gives you a form P45’.

Step 3 - deciding which tax code to use

  • Check which tax year the P45 is for. To do this look at the leaving date at item 4 of the P45.
  • Use the table below to find out which tax code to use. Find the date of leaving in Column A, then follow the instructions in Column B to decide which tax code to use.
  • A tax code is normally made up of one or more numbers followed by a letter. If the tax code on the P45 has only a number, add a letter T to the end of the code when you enter it on the P11 but do not alter the P45.
 

A
Date of leaving on P45 (item 4)

B
Date employee started working for you

Employee’s P45 has a date of leaving between 6 April 2009 - 5 April 2010

Employee starts working for you on or after 6 April 2009

Use the tax code on the P45 and enter in Box M of the P11.

Employee’s P45 has a date of leaving between 7 September 2008 - 5 April 2009

Employee starts working for you during the period 6 April 2009 to 24 May 2009

Use the tax code on the P45 but add 44 to any code ending in L. Do not carryforward any week 1/month 1 markings and enter in Box M of the P11.

Employee starts working for you on or after 25 May 2009

Use emergency code 647L on a week 1/month 1 basis and enter it in box M of the P11.

Employee’s P45 has a date of leaving between 6 April 2008 to 6 September 2008

Employee starts working for you during the period 6 April 2009 to 24 May 2009

use the code on the P45 but add 104 to any code ending in L.

Do not carry forward any week 1/month 1 markings and enter it in Box M of the P11.

Employee starts working for you on or after 25 May 2009

Use the emergency tax code 647L on a week 1/month 1 basis and enter it in Box M of the P11.

Employee’s P45 has a date of leaving before 6 April 2008

Employee starts working for you during the period 6 April 2009 to 5 September 2010

Use emergency code 647L on a week 1/month 1 basis and enter it in Box M of the P11.

Mileage payments

The following rates are used to calculate the maximum amount that can be exempted from tax and National Insurance contributions for business miles travelled in the employee’s own vehicle.

Motor cars and vans

Motorcycles

  • 24p per mile

Cycles

  • 20p per mile

For National Insurance purposes, the higher rate applies to all miles, not only the first 10,000.

Additional passenger payments

You can also pay up to 5p per mile free of tax and National Insurance contributions for each employee who travels as a passenger and is also on a business journey.

For further information on paying employees for business miles travelled using the employee’s own transport, see the CWG2(2009) Employer Further Guide to PAYE and NICs, under mileage expenses for National Insurance contributions.

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Class 1A National Insurance contributions on benefits in kind

If you provide benefits, including cars, to an employee during the tax year you may have to pay Class 1A National Insurance contributions.

The Class 1A National Insurance contributions rate for benefits provided in 2008-09 is 12.8 per cent.

Class 1A National Insurance contributions for benefits provided in the 2008-09 tax year are due to be paid by 19 July 2008. If you pay by an approved electronic payment method please pay any Class 1A NICs in time for your cleared payment to reach us no later than 19 July 2009. See below.

For more detailed information about benefits and expenses go to Dealing with expenses and benefits. Detailed information is also available in the following publications:

You can view, download and print these from your Employer CD-ROM. Copies can also be ordered from the Employer Orderline Tel 08457 646 646.

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Class 1B National Insurance contributions

If you make expenses payments to your employees or give them benefits, and you include these in a PAYE Settlement Agreement, you may have to pay Class 1B National Insurance contributions.

The Class 1B National Insurance contributions rate for the 2008-09 tax year is 12.8 per cent.

Class 1B National Insurance contributions in respect of the 2008-09 tax year are due to be paid by 19 October 2009. If you pay by an approved electronic payment method please pay any Class 1B National Insurance contributions in time for your cleared payment to reach us no later than 22 October 2009. See below.

For more detailed information about PAYE Settlement Agreements and Class 1B National Insurance contributions see:

Where the 22nd falls on a weekend or is a bank holiday, your cleared payment must reach us on the previous bank working day.

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Class 1 National Insurance contributions

Earnings limits

To calculate National Insurance contributions, three levels of earnings are used:

  • Lower Earnings Limit (LEL)
  • Earnings Threshold (ET)
  • Upper Accrual Point (UAP)
  • Upper Earnings Limit (UEL)

The corresponding weekly, monthly and annual earnings limits and thresholds are in the tables.

This information has already been used in the National Insurance tables and the National Insurance calculator on your Employer CD-ROM. If you are using the National Insurance Tables or the National Insurance calculator on your Employer CD-ROM, you do not need to do anything else other than make yourself aware of the changes to the Upper Accrual Points, thresholds and earnings limits.

Lower Earnings Limit (LEL)

This is the minimum level of earnings that an employee needs to qualify for benefits, such as Retirement Pension and Jobseekers Allowance. If an employee’s earnings reach or exceed this level, but do not exceed the Earnings Threshold, they will not pay National Insurance contributions but will be treated as having paid them when claiming benefit. For this reason, you must keep details of an employee’s earnings at or above the LEL on a form P11 or equivalent record and report them at the end of the year on a form P14.

Earnings Threshold (ET)

When the earnings exceed this level National Insurance contributions become payable by the employee and employer.

Upper Accrual Point (UAP)

The UAP is set at £770 a week, £3,337 a month, and £40,040 a year. Employers and their employees who are members of contracted-out occupational pension schemes pay NICs at the reduced contracted-out rate up to the UAP only. They then pay NICs at the higher standard rate on the employee’s earnings between the UAP and the UEL.

Upper Earnings Limit (UEL)

Where earnings exceed the UEL, the employee pays National Insurance contributions at 1 per cent on those earnings above the UEL. The UEL does not apply to employer’s National Insurance contributions, which are payable on all earnings above the Earnings Threshold, including those above the UEL, at the appropriate rate.

Statutory Sick Pay (SSP)

The weekly rate of SSP is £79.15 for employees with average weekly earnings of £95 or more.

The SSP daily rate is the weekly rate of SSP divided by the number of qualifying days in the week and then multiplied by the number of qualifying days of incapacity in the week, rounded up to the nearest penny. For SSP purposes, weeks begin on Sunday and end on Saturday.

Unrounded daily rates

Number of qualifying days in week

Number of qualifying days of incapacity for work in the week

1

2

3

4

5

6

7

£

 

£

£

£

£

£

£

£

11.3071

7

11.31

22.62

33.93

45.23

56.54

67.85

79.15

13.1916

6

13.20

26.39

39.58

52.77

65.96

79.15

 

15.8300

5

15.83

31.66

47.49

63.32

79.15

    

19,7875

4

19.79

39.58

59.73

79.15

      

26.3833

3

26.39

52.77

79.15

        

39.5750

2

39.58

79.15

 

 

      

75.1500

1

79.15

            

Unrounded daily rates are shown for employers with computerised payroll systems.

Recovery of SSP

In certain circumstances you may be able to recover some of the SSP you pay under the Percentage Threshold Scheme.

You can get back any SSP you have paid over and above 13 per cent of your National Insurance contributions liability for the same tax month in which you have paid SSP. For further information, see the Employer Helpbook E14(2009) What to do if your employee is sick.

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Statutory Maternity Pay (SMP)

Women expecting a baby on or before 4 April 2009 who satisfy the qualifying conditions are entitled to a maximum of 39 weeks SMP. These include having average weekly earnings of:

  • £87 if their baby is due between 15 July 2007 and 19 July 2008
  • £90 if their baby is due between 20 July 2008 and 18 July 2009

Women expecting a baby on or after 5 April 2009 who satisfy the qualifying conditions are entitled to a maximum of 39 weeks SMP. These include having average weekly earnings of:

  • £90 if their baby is due between 20 July 2008 and 18 July 2009
  • £95 if their baby is due between 19 July 2009 and 17 July 2010

The weekly rate is:

First six weeks of payment

Remaining weeks

90 per cent of employee’s average weekly earnings

Pay the lesser of:

  • 90 per cent of average weekly earnings

  • £123.06

For more information see the Employer Helpbook E15(2009) for Statutory Maternity Pay.

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Statutory Paternity Pay (SPP)

SPP is paid for a maximum of two weeks to employees who satisfy the qualifying conditions. These include having average weekly earnings of:

  • £90 if their baby is due on or before 18 July 2009, or if they are notified that they have been matched with a child or received official notification that they are eligible to adopt a child from abroad on or before 4 April 2009
  • £95 if their baby is due on or after 19 July 2009, or if they are notified that they have been matched with a child or received official notification that they are eligible to adopt a child from abroad on or after 5 April 2009.

The weekly rate is the lesser of £123.06 or 90 per cent of the employee’s average weekly earnings.

For more information see the Employer Helpbook E19(2009) for Statutory Paternity Pay (PDF 270K), if your employee is entitled to SPP because a baby was born. See the Employer Helpbook E16(2009) for Statutory Adoption Pay for more information if your employee is entitled to SPP because a child was being adopted in the UK or from abroad.

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Statutory Adoption Pay(SAP)

Employees who are adopting a child and are notified that they have been matched with a child or received official notification that they are eligible to adopt a child from abroad on or after 5 April 2009 who satisfy the qualifying conditions are entitled to a maximum of 39 weeks SAP. These include having average weekly earnings of:

  • £90 if they are notified that they have been matched with a child or received official notification that they are eligible to adopt a child from abroad on or before 4 April 2009
  • £95 if they are notified that they have been matched with a child or received official notification that they are eligible to adopt a child from abroad on or after 5 April 2009.

The weekly rate is the lesser of £123.06 or 90 per cent of employee’s average weekly earnings.

For more information see Employer Helpbook E16(2009) for Statutory Adoption Pay.

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Funding of SMP/SPP/SAP

All employers are entitled to recover 92 per cent of the SMP/SPP/SAP they pay.

If you qualify for Small Employer’s Relief you are entitled to recover 100 per cent of the SMP/SPP/SAP you pay plus 4.5 per cent for payments made on or after 6 April 2009.

The Small Employer’s Relief Threshold is £45,000 for payments made on or after 6 April 2009.

For more information see the:

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National Minimum Wage

From 1 October 2009

  • Main rate £5.80 per hour (22 years and over)
  • 18–21 year old rate £4.83 per hour
  • 16–17 year old rate £3.57 per hour (for workers under 18 who are above compulsory school leaving age)

These rates are likely to change from 1 October 2010. You should check the Business Link website below for up to date information.

For further details and up to the minute information:

Collection of Student Loans

The annual threshold, below which Student Loan repayments are not due, is £15,000.

If you are using the P11 calculator on your Employer CD-ROM this will calculate the Student Loan deductions for you as long as you indicate that the employee is a Student Borrower in the database.

You can use the calculator on the CD-ROM or the SL3, Student Loan Deduction Tables (PDF 32K), to calculate deductions.

There is more detailed guidance in the Employer Helpbook, E17 Collection of Student Loans (PDF 194K).

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