Tax code notice (P2) explained
A coding notice — often headed 'PAYE Coding Notice' or 'P2' — tells you the tax code HMRC has given your employer or pension provider, and shows the sums behind it. It is not a bill and it is not a demand for payment.
General information · Last reviewed
What this document usually is
Your tax code tells whoever pays you how much tax-free income to give you across the year. The notice sets out your allowances, subtracts anything HMRC thinks reduces them (untaxed income, taxable benefits, tax owed from an earlier year), and turns the result into a code such as 1257L. HMRC sends a fresh notice whenever that calculation changes.
Why you might have received it
- It is the start of a new tax year and codes have been reissued
- You changed jobs, or started a second job or a pension
- A taxable benefit such as a company car or medical cover started or ended
- You claimed expenses, professional subscriptions or Marriage Allowance
- HMRC is collecting tax owed from an earlier year through your code
- An estimate HMRC holds — for example untaxed interest — has been updated
What to check on it
- The employer or pension named on the notice is one you actually have
- The tax year the code applies to
- Each 'deduction' line, and whether the amount looks right for you
- Whether an old job is still listed and taking part of your allowance
- Whether the code ends in W1, M1 or X — an emergency code that ignores earlier pay in the year
Reading the code itself
Most codes are a number and a letter. The number is roughly your tax-free amount with the final digit dropped, and the letter describes your situation:
- L — the standard Personal Allowance
- M and N — Marriage Allowance received (M) or given away (N)
- BR, D0, D1 — all income from that source taxed at one rate, common on a second job or pension
- K — deductions exceed your allowance, so income is added rather than freed
- W1, M1 or X — an emergency code applied on a week-by-week or month-by-month basis
- S or C at the start — Scottish or Welsh rates apply
Why a wrong code costs money either way
Too little allowance and you overpay each payday until it is corrected. Too much and you build up an underpayment that HMRC will collect later. Neither is a penalty situation, but both are easier to fix early than at year end.
Things worth a second look
- An email or text with a link about your tax code — HMRC issues coding notices by post or in your Personal Tax Account
- An employer listed that you have never worked for
- A previous job still holding part of your allowance months after you left
- A large 'underpayment restriction' you were not expecting
What you might need to do next
- Compare the notice with your latest payslip to see which code is actually being used
- Sign in to your Personal Tax Account to see and correct the estimates HMRC holds
- Tell HMRC if an employer, benefit or estimate is wrong — they reissue the code to your employer
- If you are unsure whether a deduction is correct, speak to HMRC or a qualified tax adviser before assuming it is an error
Official sources
Common questions
Q. Is a tax code notice a bill?
A. No. It explains how your tax-free allowance is being applied. Any tax it affects is collected through your normal pay, not paid separately.
Q. Why did my tax code change mid-year?
A. Codes are updated whenever HMRC's picture of your income changes — a new job, a benefit starting or stopping, a claim being processed, or an estimate being revised.
Q. What does 1257L mean?
A. It is the standard code for someone with the full Personal Allowance and no adjustments. The number reflects the tax-free amount with the last digit removed.
Q. What if I think the code is wrong?
A. Check the underlying figures in your Personal Tax Account and correct anything out of date, or contact HMRC. If the amounts are complex, a qualified tax adviser can review them with you.
Related guides
Important disclaimer
General information about HMRC coding notices, not tax advice. Rates, allowances and codes change. Check GOV.UK or speak to HMRC or a qualified tax adviser about your own circumstances.
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