Understanding your employees' tax codes

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Changes during the tax year

Usually someone’s tax code changes if their tax-free income (Personal Allowance) goes up or down, for example they start or stop receiving a taxable benefit like a company car.

  1. HM Revenue and Customs (HMRC) will send you an email alert if one of your employees’ tax codes changes.

  2. Access the new tax code in PAYE Online (in ‘tax code notices’), the PAYE Desktop Viewer application, or in your payroll software (if it has this feature). Check if your employee’s previous pay and tax are included with the new tax code. If they are, note these figures.

  3. As soon as possible, and before you next pay your employee, update their payroll record with their new tax code. Add their previous pay and tax, if you received these figures with the new tax code.

A tax code notice is sometimes called a P6 form.

If you receive an employee’s new tax code too late to use in the tax year, you should use it in the new tax year.