What is a tax coding notice (P2)?

Full answer

HMRC issues a P2 Notice of Coding (also called a "PAYE Coding Notice") whenever your tax code changes. It explains how your tax code has been calculated. **What it shows:** - Your total tax-free allowances (Personal Allowance, Marriage Allowance transfer, flat-rate expenses, pension contributions). - Deductions that reduce your allowances (e.g. company benefits in kind, unpaid tax from previous years, HICBC). - The resulting **net tax-free amount** and the **tax code** that will be used by your employer or pension provider. **Common tax codes explained:** | Code | Meaning | |---|---| | **1257L** | Standard Personal Allowance of £12,570 | | **BR** | All income taxed at basic rate 20% (e.g. second job) | | **D0** | All income taxed at higher rate 40% | | **D1** | All income taxed at 45% additional rate | | **0T** | No personal allowance (new job, no P45, or PA fully used) | | **K code** | Total deductions exceed allowances — extra tax collected | | **NT** | No tax deducted | **Scottish taxpayers** have an **S prefix** (e.g. S1257L) and **Welsh taxpayers** a **C prefix** (e.g. C1257L), reflecting devolved income tax rates. **What to do if your code is wrong:** Check your Personal Tax Account at GOV.UK. You can update your details online (e.g. update employment income estimates, add employment expenses). If HMRC has included incorrect benefits in kind, contact them on **0300 200 3300**. Your employer uses the code HMRC sends — they cannot change it without an instruction from HMRC. **Emergency codes:** If you start a new job without a P45, HMRC may apply an emergency code (e.g. 1257L W1/M1 or 0T) until your records are updated.

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