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Coding Notices

You may get more than one tax code in a year. This could be for two reasons:

• you have more than one job or pension or a combination of both. HMRC may send you a separate tax code for each.  The codes will often be different because many people use their tax free allowance on their main job/pension. This may mean that no allowances will apply to your other job/pension
• you or your accountant, if you use one, may have told us about a change in your circumstances which affects the amount of tax you need to pay on one particular job/pension
  

• Understanding your P2 'PAYE Coding Notice' (opens new window)

What your tax code means

HMRC issue your tax code based on information they have about your taxable income and allowances. It tells your employer or pension provider how much income tax to deduct from your wages or pension.

Tax free amounts are made up of allowances. You are entitled to some tax-free allowance as everyone can earn a certain amount before they have to pay tax (higher personal allowances are given to people older than 65). 

Your allowances are added together to give a total amount you can receive before you pay tax. This is shown on the right of the box on the front of the P2 Coding Notice.

Depending on your circumstances, this tax free total may be reduced if you get any 'perks'. Most 'perks' are taxable and are known as taxable benefits. The most common taxable benefits are:

• medical insurance
• a company car

The taxable benefits and other adjustments are added together. These are the minus figures on the left of the box on the front of the Coding Notice.

Your total taxable benefits and other adjustments is taken away from your total tax free allowances, giving an overall total of the amount you can receive before you pay tax. This is the last number shown in the box on the front of your Coding Notice.

How your tax code is worked out

Your tax code is your tax free total with the last digit removed. So, if you have a tax free allowance of £4,124 your tax code will be 412.

Find out more about how tax codes are worked out.

• How tax codes are worked out

Lettering used in your tax code

Your tax code is usually made up of numbers and a letter at the end. The letter is usually only for use by HMRC and your employer/pension provider.

• Understanding your tax code

More useful links

• More information from HMRC on P2 Coding Notices (opens new window)
• Example of P2 PAYE Coding Notice (opens new window)