Do I really have to pay Sage for a CD to upgrade my payroll software in line with 2012/2013 legislation changes or can I do it myself from HMRC website?
You can do it yourself, just go to Legislation and make the changes in line with HMRC website.
If you want upgrades from Sage you have to either pay for sagecover which usually covers "upgrades" for 5 years thereafter you have to "buy" a new up to date copy because the older version, although upgraded year on year is classed as "out of date" and no longer upgradeable with updates. Hope this makes sense.
The other problem you may find is that they have changed the software for exporting the year end returns on line to HMRC and if you don't pay the Sagecover or upgrade you don't have access to this software.