Tax Calculations
Suffix Letters withdrawn
A
Basic allowance plus half the children’s tax credit, subject to tax at basic rate
J COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS Basic allowance plus married couple’s allowance or additional personal allowance, taxable income enters higher rate band (2001/2002 only) H Higher - basic personal allowance plus children’s tax credit, subject to tax at basic rate P Age-related single person’s allowance, person aged between 65 and 74 - abolished completely from April 2015 Elderly - basic personal allowance for person aged between 65 and 74 years plus married couple’s allowance, subject to tax at basic rate V Y Higher age-related single person’s allowance - age 75 and over - abolished for those reaching 65 on or after 06/04/2013 N.B. A, & J were discontinued at 6th April 1999; H at 6th April 2003 and V at 6th April 2009 as those to whom the suffix applied would be aged 75 by 5th April 2010. The codes used to deal with the changes to rates and thresholds for Scottish taxpayers from April 2018 in order to identify the different rates to use, will be known as SBR for the Scottish basic rate, the Scottish intermediate rate of 21% is SD0, Scottish higher rate is SD1 and the Scottish additional rate is SD2. There is no code for the Scottish starter rate. TAX CALCULATIONS Cumulation is the normal method for operating a tax code when the ‘free pay’, taxable pay and tax paid are each accumulated from the beginning of the tax year up to and including the current pay period. The cumulative totals are used for each calculation of tax deductible. With the exception of the first week/month in the tax year it may be said that the tax deducted in any pay period is a balance of tax outstanding for the year to date rather than the tax due solely on that pay period. Where a 53rd pay week occurs at the end of a tax year, tax is to be assessed on pay in that pay period without reference to the current cumulative pay or tax details - ‘on a week 1/month 1 basis’. As this will lead to an underpayment of tax, as in effect too much free pay has been taken into account, employees in Self-assessment will receive an underpayment notice after a week 53 has been processed. Since 2014 HMRC has been making efforts to recover underpayments from all taxpayers and not just those who submit Self-assessment tax returns. • Where free pay at Week 52 exceeds total pay for the year, no tax is to be deducted at week 53. • Where free pay at Week 52 is less than total pay for the year, the tax tables to be used are: Weekly Pay - week 1, Fortnightly Pay - week 2, Four Weekly Pay - week 4. Week 53 • No printing, copying or reproduction permitted.
201
Made with FlippingBook - Online magazine maker