| Mid-year tax changes are expected to cause confusion for small businesses |
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| Written by admin | |
| Sunday, 27 July 2008 | |
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Normally, businesses have to update their payroll systems twice a year - in April and May. This year, to calm the storm over the 10p tax band, Alistair Darling announced a third change, planned for the 7th September. This will affect over a million small businesses, who need to prepare for the change at a time when many payroll staff are on holiday.
The 10p tax band was abolished from 6th April, causing a sharp increase in tax for many on low incomes. This proved so controversial that, on 13th May, the Chancellor announced further changes to alleviate the burden on poorer families. In the meantime, an increase in the basic rate tax bandwidth took place on May 18th. Each of these changes affect employers, who are responsible for calculating and deducting income tax from their employees' wages. Due to the unusual way the new changes were announced, they can not be implemented until the Finance Act gains Royal Assent (expected 21st July). Accordingly, HM Revenue and Customs has not published detailed guidance, leaving employers in the dark. Anyone dealing with payroll needs to be aware of the changes, which involve an increase in tax codes and a decrease in the basic rate bandwidth. Employers using a payroll software package should check whether their vendor will supply an update under their support contract. Employers using manuals and tools from HM Revenue and Customs may have to wait until the end of August for updated versions. Employers using an online payroll service or a bureau can expect the changes to be done for them. |
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