How does my employer know my tax code when I didn’t hand in a P45?
(UK relevant – Completing form P46 and using it to decide the correct tax code. Applying a P6 coding notice.)
Your employer cannot simply make up a tax code for you. HM Revenue & Customs (HMRC) gives precise instructions about what tax code to use in certain situations. When you start a new job, your employer has to allocate a tax code to you according to the rules. And your employer may only make later changes to your tax code when instructed by HMRC to do so.
Usually, when you start a new job, you give to your new employer the form P45 that was given to you by the previous employer. Your new employer normally uses the tax code that the old employer used. If you leave a job before the end of a tax year (5 April) and start your new job in the next tax year, your employer may increase your tax code, following HMRC instructions, in order to give you the new personal allowance for the new tax year.
Example: If you left your job in March 2009, your P45 may have shown that your tax code was 603L. If you started a new job after 5 April 2009, your employer would have increased that code to 647L in order to give you the extra £440 personal allowance for the 2009/10 tax year.
What happens if you don’t have a P45 to give to your new employer? There are a number of reasons why you may not have a P45. You may not have worked before, or have been self-employed. You may never have worked in the UK before. Your previous employer may not have given you the P45 yet. Or you may simply have lost it. Whatever the reason, if you cannot give your new employer a P45, the employer must give you a form P46 to complete.
There are two exceptions to this.
(1) If you will be working for the employer for no more than one week in the tax year, you do not need to complete a form P46. If your employer knows you have another job, your tax code will be BR. If your employer does not know whether you have another job, you will be given the emergency tax code, i.e. 647L for 2009/10, applied on a ‘W1′ basis. (See What does the ‘X’ (or ’1′, or ‘W1′ or ‘M1′) after my tax code mean?
(2) If you are a student and meet the conditions for being paid without the deduction of tax (see I am a student at college or university. How can I be paid wages without paying tax?), you do not need to complete form P46. Your tax code will be NT.
Completing form P46
If those two situations do not apply, you must complete Section 1 of form P46. There are three statements and you must tick one of them and then sign to confirm that the one you have ticked describes your current circumstances. The statements are:
Statement A: This is my first job since last 6 April and I have not been receiving taxable Jobseeker’s Allowance or taxable Incapacity Benefit or a state or occupational pension.
Statement B: This is now my only job, but since last 6 April I have had another job, or have received taxable Jobseeker’s Allowance or Incapacity Benefit. I do not receive a state or occupational pension.
Statement C: I have another job or receive a state or occupational pension.
Depending on the statement you choose to tick, your employer will allocate the appropriate tax code. If you ticked
Statement A, your tax code will be the emergency tax code, applied cumulatively, i.e. 647L for 2009/10. As you have only just started work, the assumption is that your have not yet had any of your tax free pay for the year. The emergency tax code applied cumulatively will give you your full tax free pay over the remainder of the tax year.
Statement B, your tax code will be the emergency tax code, applied on a ‘W1′ or ‘M1′ basis, i.e. 647LW1 or 647LM1 for 2009/10. The assumption is that you have already received some ‘tax free pay’ (see What does my tax code mean?) in the tax year to date, so you may only have the remainder of your tax free pay for the remainder of the tax year.
Statement C, your tax code will be BR. The assumption is that all of your ‘tax free pay’ (see What does my tax code mean?) is allowed against your earnings in the other job or against your pension, so you must pay basic rate tax on all of your earnings with this employer.
If you do not tick any of the statements, your tax code will be BR and you will pay tax at 20% on all of your earnings.
There are some other situations where your employer may be told to adjust your tax code.
If you receive a form P2 Notice of Coding from your tax office giving you a new tax code and explaining how it is worked out, your employer will also receive a coding notice showing the same tax code (but without any explanation of how it is determined), with instructions to apply it on your next payday or, if it is too late for your next payday, to the payday after that.
Every year, the Chancellor increases the personal allowance and may make other changes in the Budget. These may also result in a change to your tax code from the start of the tax year and/or in May or June.
If you leave your employment and, sometime later, your previous employer has to make a further payment of earnings to you, your tax code for that payment will be BR. This is true even if you were paying tax at the higher rate (40%) before leaving the employment, or your tax code was D0.
More FAQs Related to Tax Codes
What does my tax code mean?
What does the letter at the end of my tax code mean?
What does the “X” (or “1″, or “W1″, or “M1″) after my tax code mean?
I am a student at college or university. How can I be paid wages without paying tax?