The age-related allowances have been frozen since the tax year 2013/14, all with the object of achieving a universal tax allowance that applies to everyone, irrespective of their date of birth.
Summer Budget 2015 announced that the personal allowance would increase to £11,000 from 06 April 2016. This was implemented via the Finance Act in March 2015.
The consequence of achieving the universal tax allowance in 2016/17 is that the last of the age-related suffix letters is now redundant. The Y suffix has been used for someone born before 06 April 1938 but will not be used from 06 April 2016. Therefore, HMRC’s coding run in early 2016 will change all Y suffix codes to either an L or T suffix. This has the following implications:
- Employees and pensioners will be advised via form P2
- Employers, agents and pension providers will receive more P9s for the start of the 2016/17 tax year, changing tax codes from the Y suffix to either L or T
- P6s received in-year from April 2016 will no longer contain the Y suffix
HMRC’s Employer Bulletin 57 (page 6) advises that HMRC’s systems will still accept Y suffixes in 2016/17, i.e. they will not cause the Full Payment Submission to reject. However, employers, agents and pension providers are well-advised to ensure that all Y suffixes are cleared from systems by the end of the tax year.