Update an Employee’s Tax Code P6 or P9

In the UK, employers are required to deduct income tax from their employees’ paychecks based on their tax code, which is assigned by HM Revenue and Customs (HMRC). If an employee’s circumstances change, such as starting a new job, receiving benefits, or changing their personal allowance, their tax code may need to be updated.

With the new year comes a fresh slate of taxes to contend with. Whether you are an employer or an employee, it’s important to keep up-to-date on your tax code. And if you’re an employee, there is one particular tax code you need to Update an Employee’s Tax Code P6 or P9. P6 stands for “payroll income” and is used to calculate tax withholdings from your salary. P9 stands for “payroll social security contributions” and is used to calculate tax contributions for your benefits. If you haven’t updated your tax code in a while, now is the time to do so. Not only will it save you time and hassle down the line, but it’s also important to comply with current tax regulations.

Payroll processing has become increasingly complex in recent years, owing to the frequency with which tax tables are revised. To say the least, paying employees accurately and on time has been a challenge for employers. But, this should not bother you a bit if you have Sage 50 by your side. To make life easier for you, Sage 50 has come up with some important features in its payroll module. 

With one such important functionality in the Sage software, you can update the tax code (P6 or P9) effortlessly. If you are yet to use this feature in Sage, this blog can be of help. Here, we will discuss what are P6 and P9 notifications and how to update these with the HMRC (HM Revenue & Customs).

Why do you Need to Update an Employee’s Tax Code (P6 or P9)?

The tax code of an employee may change at any time during the tax year. A notification (called P6 or P9 notification) is usually sent by HMRC to inform you about this change in tax code. This usually occurs when-

• A new employee has submitted a P46 and HMRC has informed you of the correct tax code.
• An employee’s tax-free income (such as Personal Allowance) goes up or down. For example when they start or stop receiving taxable benefits such as a company car.
• You receive new tax codes for your employees at the start of the tax year (P9X or P9T)

What is a P6 Notification?

A P6 is a notification issued by HMRC to employers, asking for the details of an employee’s tax code and previous pay and tax.

When you receive a P6, you should check or modify the employee’s tax code. Then, you need to enter any previous pay and tax, if applicable.

Read More : What is a P45 Form and Why Does it Matter

What is a P9 Notification?

A P9 is a notification issued by HMRC to employers. This is to inform them about a change in the employees’ tax code.

Two different P9 forms exist:

• P9T– This is regarding an individual tax code change
• P9X – This is related to a general tax code change and is applicable to multiple employees.

When you receive a P9 notification, you should make sure to update the tax code in your employee records.

What are the benefits of Updating an Employee’s Tax Code?

There are many benefits to updating an employee’s tax code. First and foremost, it can save the employee time and money. By taking advantage of the latest deductions and credits available, an updated tax code can reduce an employee’s taxes. Additionally, updating an employee’s tax code can improve their accuracy when filing their taxes, which can lead to fewer potential audit opportunities. Finally, updating an employee’s tax code can also bolster their confidence in the company’s compliance with all applicable tax laws.

Procedure to Update an Employee’s Tax Code (P6 or P9)

A) Change the Tax Code of the Employee

• Go to the Employees section
• Choose the concerned employee
• Click on Edit.
• Go to Current Tax Details
• Now enter the new Tax Code.
• If needed, checkmark or unmark the Week1/Month1 check box.
• Click to save your changes.

B) Enter the Previous Pay and Tax of the Employees

If a new employee of your organization provided a P46 before, HMRC may send a notification to inform you of his/her new tax code. In such a case, you need to enter the details of his/her previous pay and tax as well. Please follow the steps below-

• Go to the Previous Tax details section
• Select Employee declaration P45.
• Click on the Circumstances list
• Select one of the options to select a declaration as per the job details of the employee
• Enter the tax code from the P6 or P9 in the Tax Code box.
• Enter the date on which the employee completed his/her previous employment in the Leaving Date box. This will be on his P45.
• If needed, checkmark or unmark the Week1/Month1 check box.
• Enter the week/month of the employee’s final pay run in the previous employment in the Final Pay Period list.
• Type in the previous pay value from the P6 or P9 details in the Total Pay To Date box.
• enter the previous tax value from the P6 or P9 in the Total Pay To Date box, 
• Click to save your changes.
• Next time when you process the payments of this employee, the tax due is determined using the employee’s new tax code.

Also Read : Sage 50 Incorrect Payroll Taxes Calculation Problem

Final Words

In this blog, we tried to share all the information you need regarding how to update the P6 or P9 details of an employee. We hope, after going through the blog and following the steps mentioned herein; you will find it easier to use this feature in Sage to the best of your advantage. If you experience any difficulties while using this feature, we would recommend you to get in touch with some experienced Sage professionals.

Frequently Asked Questions (FAQs)