Glossary · UK
What is Notice of Coding (P2)?
A letter or online notice from HMRC explaining how your PAYE tax code has been worked out for the year.
Full Definition
A Notice of Coding, issued on form P2, is the explanation HMRC sends to tell you how your tax code has been calculated for a tax year. It sets out your tax-free allowances, such as the Personal Allowance of 12,570 pounds for 2026/27, and then lists any deductions that reduce that allowance, for example taxable benefits in kind, untaxed interest, or amounts owed from earlier years. The figures are added together and divided by ten to produce the number in your code, so a code of 1257L reflects the full standard Personal Allowance. You may receive a notice when your circumstances change, for instance when you start getting a company car or when an underpayment is collected through your code. It is worth checking the notice carefully, because an incorrect code can mean you pay too much or too little tax across the year. If anything looks wrong you can contact HMRC or update your details through your Personal Tax Account to have the code corrected.