The short version: A PAYE Notice of Coding (form P2) is a letter from HMRC telling you your tax code and explaining why you have that code. Your employer uses this code to work out how much tax to deduct.
What’s a tax code?
It’s a combination of numbers and letters that tells your employer how much tax free income you’re entitled to. The most common code reflects the standard Personal Allowance. Different letters indicate different circumstances.
Why does it matter?
The wrong tax code means paying the wrong amount of tax. Too high and you’ll underpay (and owe money later). Too low and you’ll overpay (and wait for a refund).
Should you check it?
Yes. When you receive a Notice of Coding, make sure the information looks right. Does it account for the correct allowances? Are there any deductions you don’t recognise? If something’s wrong, contact HMRC.
When do you get one?
Usually at the start of the tax year, or when your circumstances change. You can also check your tax code anytime through your Personal Tax Account online.
Confused by your tax code? We can help you understand what it means.
