PAYE notice of coding, also known as a P2 gives taxpayers an explanation of what their tax code is and the reason as to why they have that tax code.
You receive a P2 notice of coding when your tax code changes, this can be for a number of reasons:
- You start to get income from an additional job or pension
- Your employer tell HMRC you have started or stopped getting benefits from your job
- you get taxable state benefits
- you claim Marriage Allowance
- you claim expenses that you get tax relief on
You may also be put on an emergency tax code if you change jobs.
HMRC have introduced new interactive guidance to support taxpayers. It will allow them to select the correct guidance according to their needs and understand what has changed and what, if anything, they need to do.
Getting help with a tax code
If your tax code has changed, you can use the Get help understanding your tax code tool to find out:
- how this will change the amount of tax you pay
- what you may need to do next
Depending on your circumstances, you may be asked about:
- your annual income, before any deductions
- any company benefits you get or have previously received
- the amount of State Pension you get each year
You can Sign into your personal tax account to check or update your details with HMRC.
Who is responsible for my tax?
Often we think that our employer has a responsibility to collect all the tax due and that we personally don’t have a responsibility to ensure our tax affairs are correct and in order.
The reality is a little different! Pay As You Earn (PAYE) has rules that are operated by employers, however elements are a bit of a guess and involve estimates. This can result in too much or too little tax being collected.
After the end of the tax year finish on 5th April, HMRC reconcile the collected tax by your employer and compare with a more accurate annual calculation which may include additional details relating to other areas that affect your tax. This can result in a refund or a bill.
When starting or changing jobs, it is critical that you provide important information to help get your tax as correct as possible. Give your new employer any P45 that your old job gave you, and if you don’t have one, complete a Starter Declaration. It is essential that you do this when you join and prior to your first pay day. Handing them in later is often too late me you may end up paying too much tax.
It is also important to inform HMRC when you move address or there is a name change for marriage, civil partnership, divorce or other lawful reason. Yes your employer may well have informed HMRC on their regular reports, however, HMRC require you, the tax payer, to inform them of such changes, not your employer (who they will ignore).
PAYadvice.UK 10/12/2022
