From April 2009 the Upper Earnings Limit (UEL) for employees rises significantly for the second year in succession. Announced in November's Pre Budget Report, the limit goes up by a further £74 per week next year, on top of the £100 per week increase in the current year, taking the top limit to £844 per week - a rise of 26% over the two years.

The change this year is designed to align the Upper Earnings Limit - the point at which the employee contributions falls to 1% - with the higher rate tax threshold. This alignment was proposed in Gordon Brown's last Budget in March 2007.

However, at the time it looked as though this would at last achieve a longed for simplification - a smooth transition for both tax and NIC's from a basic rate with full employee contributions to a higher rate will reduced contributions - in essence rates of deduction of 31% and 41% applying at the same points.

However, the hike in personal allowances announced last May has now ensured that the entry level for tax and NIC differ quite markedly, so there would seem little point in pressing ahead with aligning the top end. Except of course that such a move is also by chance a revenue raiser.

And just to prove that this is about contributions and not additional benefits, it was also announced some time ago that a new "Upper Accruals Point" UAP) would be introduced this year. This is the point above which employees will not be credited with any additional earnings related pension entitlement. Funnily enough it is the current upper earnings limit of £770 per week. Put simply, employees earning above this limit will continue to pay full rate (11%) contributions up to £844 per week, but will receive no benefits in return. The self employed may have little sympathy for them, of course, as they are well used to paying Class 4 contributions which are little more than additional tax (albeit at a lower rate of 8%).

Which brings us to the additional column on form P11 (the deductions working sheet). Employers will now have to record earnings up to UAP, then from UAP up to UEL. So an extra column is needed. Little worry for those with up to date software but all makes more work for those with manual payrolls (or spreadsheets to update!)