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HMRC internal manual

PAYE Manual

PAYE operation: aspects of PAYE operation - employee: coding

New employee has form P45

HMRC will not normally be involved where a new employee has form P45 parts 2 and 3. If the P45 shows a code and cumulative pay and tax, the new employer completes a Deductions Working Sheet and operates PAYE in the usual way.

Where the tax code has an S prefix (except tax code NT) this indicates the individual pays income tax at the Scottish rate(s). Further information about the Scottish rate of income tax is given at PAYE100035.

When to issue a form P6

You must issue form P6 for a new employee (and give any other instructions necessary) if

  • For any reason the employer cannot follow the usual procedure
  • Particulars on form P45 need to be amended, for example, pay and tax. In such cases employers must deduct tax by reference to the details on form P6, whether or not they agree with the Tax Tables

You should not normally telephone the employer to give notice of a new tax code, you must issue the P6 as normal using the coding function.

In urgent and exceptional cases telephone the employer to confirm the code and a manual P6 can be faxed on the same day to verify it. You must confirm you have the correct fax number and the time that you will fax the P6 so that the employer can securely receive it. This should be followed up with a written (or system issued) P6.

Using cumulative basis

PAYE should always be operated on a cumulative basis where appropriate. Before issuing form P6 find out details of the cumulative pay and tax from 6 April last to the date the last employment ceased.

Use the coding function to issue a P6 for a cumulative code. If you prepare a P6 manually, enter the details in the space provided. Enter Nil where there are no previous earnings or tax.

If no details of previous pay and tax are available, you may need to use the Week 1 / Month 1 basis.

Using Week 1 / Month 1 basis

For some employees the employer must use Week 1 or Month 1 of the pay adjustment tables every pay day. This happens if

  • Details of the employee’s previous pay and tax are not available
  • The cumulative basis does not apply for some other reason

Use the coding function to issue a P6 for a Week 1/ Month 1 code. If you prepare a P6 manually, write Week 1 or Month 1 alongside the code.

PAYE76000 onwards includes advice on how to operate the Week 1/ Month 1 basis during the year of retirement.

Restoring cumulative code

Send form P6 to the employer cancelling the Week 1 or Month 1 basis and restoring the cumulative basis as soon as you have previous pay and tax details, unless the employee asks you not to disclose these details to his new employer.

Cases where you should use code NT.

For information on where you should use code NT refer to subject ‘Cases where you should use code NT’ PAYE11010.

Tax code NT will remain the same for both United Kingdom (England, Wales and Northern Ireland) and Scottish taxpayers.