The 2021/22 tax year starts on 6 April 2021. If you employ staff, you will need to update their tax codes before you pay them for the first time in the new tax year. However, remember to finalise the 2020/21 tax year before updating your payroll software and data for 2021/22.
The tax code that you will need to use for an employee from 6 April 2021 will depend on whether or not HMRC has sent you a notification of a new tax code to use from that date.
The personal allowance is increased to £12,570 for 2021/22. As a result, the PAYE starting threshold will increase to £242 per week (£1,048 per month). The emergency tax code for 2021/22 is 1270L.
If HMRC issue a new tax code for an employee, you will receive either a paper form P9(T), ‘Notice to employer of employee’s tax code’, or an internet notification of coding if you are registered for HMRC’s PAYE Online Service. To access your code online, you will need to:
- Go to the login page for PAYE online and select ‘Sign in’.
- Sign in to the service using your Government Gateway User ID and password.
- From your Business Tax Account home page, select ‘Messages’ and then select ‘PAYE for employers messages’.
- Select ‘View your tax code notices’.
- From the tax year drop down menu, select ‘2021/2022’.
You should use the form P9(T) or the online tax code notification with the most recent date if you have received more than one for 2021/22, and discard any previous notifications. You should update your 2021/22 payroll to reflect the tax code shown in the notification for that employee.
If HMRC has not issued a tax code notification for an employee, you will need to update their 2020/21 tax code to reflect the increase in the personal allowance to £12,570 for 2021/22. To do this, you should:
- Add 7 to any tax code ending in L;
- Add 8 to any tax code ending in M; and
- Add 6 to any tax code ending in N.
For example, 1250L will become 1257L.
You should not carry over any ‘week 1’ or ‘month 1’ markings.
Scottish taxpayers are identified with an ‘S’ prefix and Welsh taxpayers are identified with a ‘C’ prefix. Check any Scottish or Welsh employees (those living, respectively, in Scotland or in Wales) have the correct tax codes, including the prefix.
You can find more information on tax codes to use from 6 April 2021 in HMRC’s P9X(2021) guidance.
Please get in touch if you need assistance in updating your employees’ tax codes for the 2021/22 tax year.