Tax code

The code is a payroll instruction

A tax code tells payroll how HMRC expects Income Tax to be calculated for one employment. Its numbers and letters can reflect a tax-free amount, the part of the UK whose income-tax bands apply, a different rate treatment or a non-cumulative basis.

The employer applies the code; it does not decide the employee's overall tax position. The HMRC tax-code overview explains that a new starter's code normally comes from a P45, while HMRC can issue a replacement during the year.

Use the newest authorised information

For a starter, take the code from the P45 where the rules allow it or use the outcome from the starter-checklist process. Record any week 1, month 1 or other basis exactly as instructed. If HMRC sends a coding notice, update payroll promptly and keep the notice date so it is clear which instruction replaced which.

Do not change a code because the employee thinks their deduction looks wrong. They can check or query their code with HMRC, but the employer should continue using the authorised code until HMRC supplies another one. The tax-code change guidance explains how employers receive and apply changes.

Reset carefully at the new tax year

Before the first payroll after 6 April, follow HMRC's annual coding instructions. Some codes carry forward, some change and non-cumulative markings may need different treatment. The 2026 to 2027 P9X is specific to that year, so use the equivalent current instruction at each rollover rather than copying last year's checklist.

After every run, make sure the code and basis appear correctly in the payroll record and that the resulting deduction is visible on the payslip. If a code is applied late or incorrectly, correct the payroll report using HMRC's current method and keep the old instruction, replacement notice and correction together.