Glossary · UK

What is Coding Notice?

An HMRC document (form P2) that explains how your PAYE tax code was worked out and what allowances and deductions it includes.

Full Definition

A coding notice, issued by HMRC as form P2, sets out how your PAYE tax code has been calculated for the tax year. It lists your tax-free allowances - typically the Personal Allowance of GBP 12,570 for 2026/27 - and any deductions that reduce it, such as taxable benefits in kind, untaxed savings, underpaid tax from earlier years, or the High Income Child Benefit Charge. HMRC sends the notice when your code changes and shares the code with your employer or pension provider so the right amount of tax is collected through payroll. Checking it matters because an incorrect code can mean you pay too much or too little tax across the year. Common errors include an outdated benefit figure, a duplicated job, or a wrongly applied emergency code. If something looks wrong you can contact HMRC to have the code amended, and any over- or under-payment is then corrected through your wages.