With end of financial year coming up I thought I’d clarify when to start using the new payroll tax rates. The ACC levy portion of the PAYE deduction decreases from April 1 2014, so it’s important to get this right as for most employees they will be getting more in their pocket with this change.
This can sometimes be confusing because with PAYE, when you pay the IRD depends on when the actual pay date is, when the employee was actually paid. So if you have a calendar month payroll that ends 30 March and you pay your staff on 2 April, for example, then the PAYE relating to that period goes onto the April PAYE return, not March.
However, new tax rates come into effect based on the pay period end date. So in our earlier example, the pay period ends in March so the 2013 tax year rates apply. But if your pay period goes over the end of year period, say you have a fortnightly pay period which ends 6 April, then the new 2014 tax year PAYE rates apply to that entire pay period. It doesn’t matter that some of the period falls into the last tax year. You don’t have to calculate different rates for the different days that fall into different tax years.