Update an Employee’s Tax Code P6 or P9

Tax Code P6 and P9

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.

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.

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

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

Please follow the steps below-

Total Time: 30 minutes

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.

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.

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💠FAQs💠

How can I access My Tax Code Notices Online?

To access your online tax codes notices:
🔹 Log into the government gateway.
🔹 From the Business tax account home page, select Messages and then select PAYE for employer’s messages.
🔹 Select View your Tax Code Notices

How to Install the Payroll Tax Table Update in Sage 50?

Please follow the steps mentioned below- 
🔹 On your desktop, click on the My Computer icon 
🔹 Click on the  Browse tab to navigate to the Sage 50 data path
🔹 Now click on the Update folder below the data path
🔹 Locate the tax table update file
🔹 The tax table update file will pop up on your screen with all the details such as the month of update, payroll year and the version of the Sage software
🔹 Make sure all the relevant details are filled 
🔹 Click  on the tab named Run Update File 
🔹 Follow the instructions appearing on your screen
🔹 Click on I Agree on the terms & conditions page 
🔹 Repeat the first few steps  to save the installed tax  forms  
🔹 Wait till the updating process gets completed. Thereafter, you will be able to run the new tax tables.

What is the procedure to Create a New Payroll Deduction in Sage 50?

Please follow the steps given below-
🔹 Open Sage 50 
🔹 Select Setup
🔹 Then go to Settings
🔹 Click on Payroll
🔹 Navigate to Deductions
🔹 Change the name of the next available deduction to the specific deduction you want to create.
🔹 If needed, you can alter the deduction type (percentage of gross or amount) by going to Deduct by Column, as appropriate
🔹 You may opt to apply the deduction either after or before the taxes are applied. 
🔹 Now select Setup
🔹 Then go to Settings
🔹 Click on Payroll
🔹 Navigate to linked accounts
🔹 Click on the Payroll Deductions tab. The new deduction will be seen in the column below. You will have to link it to either an Expense or Payables account.
🔹 Lastly, open the Employee Record
🔹 Then check mark the Use column adjacent to the New Deduction tab and also specify the suitable deduction rate.

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