PAYE and National Insurance contribution rates and limits for 2008-09

This booklet gives details of:

  • PAYE thresholds and rates
  • Mileage payments
  • Class 1A National Insurance contributions
  • Class 1B National Insurance contributions
  • Class 1 National Insurance contributions earnings limits, thresholds and rates
  • Statutory Sick Pay (SSP)
  • Statutory Maternity Pay (SMP)
  • Statutory Paternity Pay (SPP)
  • Statutory Adoption Pay (SAP)
  • Funding of SMP, SPP and SAP
  • National Minimum Wage
  • Collection of Student Loans

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 booklet. Alternatively, the Employer CD-ROM contains calculators featuring most of these rates and limits.

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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:

  • £116.00 weekly
  • £503.00 monthly

Rates

The tax rates are:

  • basic rate - 20 per cent up to £34,800
  • higher rate - 40 per cent over £34,800

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 543L for paydays before 7 September 2008.

The emergency tax code is 603L for paydays on or after 7 September 2008.

Deciding which tax code to use

Use the information in Step 3 below together with the guidance at Step 3 on page 23 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.
  • 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.
  • 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 on or after 7 September 2008

Employee starts working for you on or after 7 September 2008 Use the tax code on the P45 and enter in Box K of the P11.

Employee’s P45 has a date of leaving during the period 6 April 2008 to 6 September 2008

Employee starts working for you during the period 6 April 2008 to 6 September 2008 Use the tax code on the P45 and enter in Box K of the P11.

Employee starts working for you on or after 7 September 2008 Use the code on the P45 and add 60 to any tax code ending in L, for example, tax code 543L becomes 603L.

Employee’s P45 has a date of leaving during the period 6 April 2007 to 5 April 2008

Employee starts working for you during the period 6 April 2008 to 24 May 2008

  • use the code on the P45 and add 21 to any tax code ending in L, for example, 522L becomes 543L, but do not carry forward any week1/month 1 markings from the P45

  • enter the amended code at item 12 on Part 3 of the P45

Employee starts working for you during the period 25 May 2008 to 6 September 2008 Use tax code 543L on a week 1/month 1 basis.

Employee starts working for you on or after 7 September 2008 Use the emergency tax code 603L on a week 1/month 1 basis.

Employee’s P45 has a date of leaving before 6 April 2007

Employee starts working for you during the period 6 April 2008 to 6 September 2008 Use tax code 543L on a week 1/month 1 basis.

Employee starts working for you on or after 7 September 2008 Use the emergency tax code 603L on a week 1/month 1 basis.

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(2008) 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 2007-08 is 12.8 per cent.

Class 1A National Insurance contributions for benefits provided in the 2007-08 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 22 July 2008. See below.

For more detailed information about benefits and expenses see:

You can get these from the Employer Orderline on Tel 08457 646 646 or view and print them off from your Employer CD-ROM.

Guidance can also be found by visiting Expenses and benefits in kind, a guide to tax and National Insurance contributions, also available on your Employer CD-ROM.

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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 2007-08 tax year is 12.8 per cent.

Class 1B National Insurance contributions in respect of the 2007-08 tax year are due to be paid by 19 October 2008. 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 2008. See below.

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

You can get a CWG2 from the Employer Orderline on Tel 08457 646 646 or view and print it off from your Employer CD-ROM.

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 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 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 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 £75.40 for employees with average weekly earnings of £90 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

£

 

£

£

£

£

£

£

£

10.7714

7

10.78

21.55

32.32

43.09

53.86

64.63

75.40

12.5666

6

12.57

25.14

37.70

50.27

62.84

75.40

 

15.0800

5

15.08

30.16

45.24

60.32

75.40

 

 

18,8500

4

18.85

37.70

56.55

75.40

 

 

 

25.1333

3

25.14

50.27

75.40

 

 

 

 

37.7000

2

37.70

75.40

 

 

 

 

 

75.4000

1

75.40

            

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(2008) What to do if your employee is sick.

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Statutory Maternity Pay (SMP)

Women expecting a baby on or before 5 April 2008 who satisfy the qualifying conditions are entitled to a maximum of 39 weeks SMP. These include having average weekly earnings of:

  • £84 if their baby is due between 16 July 2006 and 14 July 2007
  • £87 if their baby is due between 15 July 2007 and 19 July 2008

Women expecting a baby on or after 6 April 2008 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

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
  • £117.18

For more information see the Employer Helpbook E15(2008) Pay and time off work for parents.

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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:

  • £87 if their baby is due on or before 19 July 2008, 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 5 April 2008
  • £90 if their baby is due on or after 20 July 2008, 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 6 April 2008

The weekly rate is the lesser of £117.18 or 90 per cent of the employee’s average weekly earnings.

For more information see the Employer Helpbook E15(2008) Pay and time off work for parents if your employee is entitled to SPP because a baby was born. See the Employer Helpbook E16(2008) Pay and time off work for adoptive parents 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 6 April 2008 who satisfy the qualifying conditions are entitled to a maximum of 39 weeks SAP. These include having average weekly earnings of:

  • £87 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 5 April 2008
  • £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 after 6 April 2008

The weekly rate is the lesser of £117.18 or 90 per cent of employee’s average weekly earnings.

For more information see Employer Helpbook E16(2008) Pay and time off work for adoptive parents.

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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 2008.

The Small Employer’s Relief Threshold is £45,000 for payments made on or after 6 April 2008.

For more information see the:

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National Minimum Wage

From 1 October 2007

Main rate

  • £5.52 per hour (22 years and over)

Development rate

  • £4.60 per hour (18 – 21 year olds)

Young workers rate

  • £3.40 per hour (for workers under 18 who are above compulsory school leaving age)

From 1 October 2008

Main rate

  • £5.73 per hour (22 years and over)

Development rate

  • £4.77 per hour (18 – 21 year olds)

Young workers rate

  • £3.53 per hour (for workers under 18 who are above compulsory school leaving age).

For up to the minute information:

Collection of Student Loans

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

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

There is more detailed guidance in the Employer Helpbook, E17 Collection of Student Loans.

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Help and further guidance

Help and further guidance about tax and National Insurance contributions is available from the following sources:

Your Employer CD-ROM

Your Employer CD-ROM has most of the forms and guidance you will need to run your payroll throughout the year.

The CD-ROM has:

  • a P11 calculator that will work out and record your employees’ tax, National Insurance contributions and Student Loan deductions every pay day with a linked P32 record of deductions that works out what you need to pay us
  • a range of other calculators that work out car and car fuel benefit, Statutory Payments and Student Loan deductions
  • a P45 checker that tells you what gross pay and tax to date figures to enter on the P11 for a new employee

There is also:

  • a Learning Zone to help you understand payroll topics such as Statutory Payments, Student Loan deductions and PAYE Online
  • a Payroll Basics section for new and less experienced employers explaining what to do when employing someone for the first time

Employer Helpbooks

Our Employer Helpbooks will help you understand and operate PAYE, National Insurance contributions and other payroll related matters.

The Helpbooks are for guidance only, they are not comprehensive and have no legal force.

We also have many other leaflets and booklets that give further guidance, for example:

  • CWG2(2008), Employer Further Guide to PAYE and NICs
  • CWG5(2008), Class1A NICs on benefits in kind
  • 480(2008), Expenses and Benefits - a tax guide
  • 490(2008), Employee travel - A tax and NICs guide for employers.

You can view, download and print the full range of Helpbooks, booklets and other forms and guidance by visiting the employers area of this website or your Employer CD-ROM.

Or you can order copies from the Employer Orderline.

Forms and guidance in Braille, large print and audio

For details of employer forms and guidance in Braille, large print or audio call the Employer Orderline and ask to speak to the Customer Service Team.

Yr Iaith Gymraeg

Ffoniwch 0845 302 1489 i dderbyn fersiynau Cymraeg o ffurflenni a chanllawiau.

By phone - Employer Helplines

(We may record calls for quality and training purposes.)

If you have a hearing or speech impairment, and use a textphone:

Tel 0845 602 1380

(only people with specialised equipment such as Minicom to use this service.)

A list of Helplines and opening hours is available:

  • by visiting the Helplines pages
  • on your CD-ROM
  • in your Employer Bulletin

Your HM Revenue & Customs (HMRC) office

Your own HMRC office can also help you.

Please Contact Us.

Please tell us your Employer reference. You will find it on correspondence from your HMRC office.

In person

We can offer you education and support on all aspects of your payroll explaining:

  • what you need to do
  • the deadlines you need to meet
  • the forms you need to fill in
  • the records you need to keep

We also have a range of workshops which are free of charge on many payroll topics.

You can get further information about the workshops from the Business Support teams pages, or you can call one of the helplines.

Online Services

For information about our online services, visit our PAYE Online services page.

For help and assistance using our online services, contact the Online Services Helpdesk.