Income Tax Rates – Handling the 50% tax rate from April 2010Wednesday, September 23rd, 2009
In previous newsletters we have suggested that tax code D1 would likely be used to force deduction of tax under PAYE at 50% when this new higher rate is introduced in April 2010. Tax code D0 is currently used where all of an employee’s earnings are taxable under PAYE at the 40% tax rate. The current computer specifications for PAYE tax table routines define the use of tax codes D1 and even D2 for higher rates of tax. Most, if not all, computerised payroll systems are capable of handling tax code D1.
However, at a recent meeting of the British Computer Society, it was reported that HMRC had ruled out the use of code D1 for this purpose but would not comment on how it will be managed. Very few employees are likely to be in a position where all of their earnings have to be taxed at 50%; it will normally only be those with two jobs, where annual earnings in one exceed £150,000 and, as a result, all earnings in the other must be taxed at 50%.
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