PAYE notices of coding

Produced by Tolley in association with

Employment Tax

Guidance

Notices of coding are how HMRC notifies both the employee and the employer of the tax code to be applied to the employee’s earnings. There are several types of coding notice, as detailed below. Only one of these types of notice, form P2, is sent to the employee, the others are sent to the employer only. The type of notice sent is determined by the circumstances giving rise to the change in the employee’s tax code.

The requirements for issuing a code, updating codes, and what may or may not be included in the code are set out in SI 2003/2682, reg 14. There are some complexities to the legislation. See Simon’s taxes E4.1132 for more on how a tax code is determined. The code is referred to widely as both the ‘tax code’ or ‘PAYE code’.

Form P2

This is the notification the employee receives from HMRC detailing what the tax code is and how it has been derived.

The coding starts with the appropriate personal allowance. Added to this are any reliefs that

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