What is a Notice of Coding and why has HMRC sent me one?

Full answer

A Notice of Coding, formally form P2, is HMRC's explanation of how they arrived at your current tax code, sent to you (and a copy to your employer or pension provider, though they only see the code itself, not the full breakdown) whenever your code is set or changed. It shows your starting Personal Allowance (£12,570 for most people in 2026/27), then lists any additions or deductions that adjust it -- for example, additions for expenses you can claim, such as professional subscriptions or working from home tax relief, and deductions for things like company car or medical insurance benefits in kind, untaxed savings interest above your Personal Savings Allowance, or a previous tax underpayment being collected gradually through your current year's code (usually a reference to "an amount that reduces your allowances" with an explanation). Understanding your Notice of Coding matters because tax codes are not infallible -- HMRC relies on information from employers, previous years' Self Assessment returns, and estimates, which can be wrong or out of date. If your Notice of Coding includes an estimate of a benefit in kind (such as private medical insurance) that no longer applies because you have changed employer, or if it shows an underpayment you believe has already been settled, you should contact HMRC or update your details via your personal tax account to have the code corrected, since an inaccurate code can mean paying considerably more or less tax than you actually owe throughout the year. Notices of Coding are typically sent out in bulk in January to March ahead of the new tax year starting 6 April, as well as individually whenever a mid-year change occurs.

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