How to Check Your PAYE Notice of Coding From HMRC
As well as paying your tax on time, it's essential to check the Pay As You Earn (PAYE) notice of coding that HMRC has given you. This notice dictates how you will be taxed and directly influences the amount of money you will pay in tax each week or month.
What your P2 notice of coding consists of
The HMRC tax coding notice is known as a Form P2 and is usually issued at the start of each new tax year. It outlines not only what your new tax code is but also the reasons why you have been given that particular PAYE notice of coding. Your tax code considers any tax-free personal allowances, expenses and company benefits you receive from your employment, such as a company car and mileage, overnight accommodation etc. It will also take into account any overpaid tax from the previous year or earnings from renting a property, for instance.
What if you don't receive a P2 PAYE notice of coding?
It may be that you don't receive a form P2 PAYE notice of coding. In which case, you can find out what your tax code is by looking up your Personal Tax Account online at the GOV.UK website. If you want a breakdown of how your tax code is calculated, HMRC will usually send this out if you write to them and request it.
It is your responsibility to check your tax coding notice; therefore, it is vital that you do so. HMRC simply issues the code and doesn't double-check that it is correct. This check is something you are expected to do or you could risk over- or under-paying tax. If you find out it's wrong, you need to let HMRC know that there is an error.
What your HMRC tax code stands for
The tax code you receive is actually what your tax-free amount is, minus the last number. For example, if you are entitled to £12,570 tax-free, your code will be 1257. A letter will then be added at the end.
Some examples of what the letters stand for include:
- L – you will get the basic personal allowance
- N – you have transferred some of your personal allowance to your spouse or civil partner's personal allowance
- S – you pay tax in Scotland
- BR – basic rate tax for a second job or pension
- D0 – income from this particular employment is to be taxed at the higher rate
- NT – no tax is to be deducted
Sometimes, if you have just started a new job and don't have a P45, you may be charged emergency tax (an example of an emergency tax code is 1257X). This code means that you won't have any allowances or reductions taken into account – at least not until HMRC is able to update your code.
Some people's tax codes will change during the tax year. This change could be because they are receiving additional benefits or because they have changed jobs. It could also be down to the simple fact that the previous code was wrong.
Get in touch
If you are confused about your tax code and want it checked or would like us to look over your accounts in general, please get in touch with the team here at Keith Graham Chartered Accountants in Aldershot. You can easily contact us via phone, tel: 01252 312561 or by email: info@keith-graham.co.uk.