Payroll guide
UK payroll, explained in plain English
Tax codes, the P-forms, coding notices and Real Time Information — what they are, when they matter, and what you need to do. A quick reference for employers and employees.
Tax codes, the P-forms, coding notices and Real Time Information — what they are, when they matter, and what you need to do. A quick reference for employers and employees.
Your tax code tells an employer how much tax-free pay (Personal Allowance) to give you before deducting Income Tax. It's set by HMRC. The number × 10 is your tax-free amount for the year (so 1257L = £12,570), and the letter describes your situation.
| Code | What it means |
|---|---|
| 1257L | The standard code — full Personal Allowance of £12,570 (2025/26 & 2026/27). |
| L | You get the standard tax-free Personal Allowance. |
| M / N | Marriage Allowance: M = you've received 10% of your partner's allowance; N = you've transferred 10% to your partner. |
| T | Your code includes other calculations (e.g. an income-related allowance reduction). |
| K | Deductions (untaxed income, benefits, or tax owed) are greater than your allowance, so an amount is added to your taxable pay instead of deducted. |
| 0T | No Personal Allowance — used when it's all been used up, or for a new starter with no details whose pay is above the threshold. |
| BR | All this income is taxed at the basic rate (20%) — usually a second job or pension. |
| D0 / D1 | All this income taxed at the higher rate (40%) / additional rate (45%). |
| NT | No tax is taken from this income. |
| W1 / M1 / X | Emergency, "non-cumulative" codes — tax is worked out on that pay period alone, ignoring earlier pay. Usually temporary until HMRC issues the right code. |
| S… / C… | An S prefix = Scottish rates; a C prefix = Welsh rates. (Scotland has its own income tax bands.) |
These are the documents that move between you, your employee and HMRC across the payroll year.
| Form | What it is & when |
|---|---|
| P45 | Given to an employee when they leave. Shows their pay and tax to the leaving date so their next employer (or HMRC) can tax them correctly. Three parts — the employee keeps one and gives the others to their new employer. |
| P60 | An end-of-year certificate of total pay and tax for the year. Must be given to every employee still employed on 5 April, by 31 May. It's their record for things like mortgages, tax refunds and Self Assessment. |
| P11D | Reports taxable benefits in kind (company car, private medical insurance, etc.) that weren't payrolled. Filed with HMRC by 6 July after the tax year. |
When someone joins, you need the right tax code from day one.
HMRC tells employers to change tax codes through two notices. They look similar but happen at different times.
| Notice | What it is |
|---|---|
| P6 | A mid-year notice telling you to change a specific employee's tax code (e.g. their circumstances changed). Apply it from the date HMRC specifies. |
| P9 / P9X | New-tax-year coding. The P9X sets out the general changes that apply to many employees (e.g. an allowance uplift); individual P9T notices cover specific people. Apply these from 6 April. |
Since 2013, employers report pay and deductions to HMRC every time they pay staff, not just once a year. Two submissions do the work:
| Submission | What it does |
|---|---|
| FPS | Full Payment Submission — sent on or before each payday, reporting what each employee was paid and the tax/NI/other deductions taken. |
| EPS | Employer Payment Summary — sent monthly when you need to tell HMRC about things the FPS doesn't show: reclaiming statutory pay (e.g. maternity), claiming the Employment Allowance, or reporting that you paid no staff that month. |
Employees pay Class 1 NI through payroll, and employers pay a separate employer's NI on top of wages. Each employee has an NI category letter that sets the rates — most are category A; others reduce employer NI:
| Category | Typically |
|---|---|
| A | Most employees — standard rates. |
| M | Employees under 21. |
| H | Apprentices under 25. |
| V | Qualifying veterans (first year of civilian employment). |
| C | Employees over State Pension age (no employee NI). |
HMRC updates codes when your circumstances change — a new benefit (like a company car), a second job, underpaid tax from a previous year, or the start of a new tax year. They tell your employer via a P6 (mid-year) or P9 (new year) notice. If a change looks wrong, contact HMRC — your employer can only use the code HMRC issues.
A temporary code (often 1257L on a "W1/M1/X" basis) used when an employer doesn't yet have full details — for example a new starter with no P45 or completed Starter Checklist. It taxes each pay period in isolation, so you may over- or under-pay until HMRC issues the correct cumulative code.
Ask them to complete HMRC's Starter Checklist (the replacement for the old P46). Their answers tell you which starting code to use so they're taxed correctly from the first pay run.
By 31 May after the tax year ends, for anyone still employed on 5 April. It summarises their total pay and tax for the year.
Both are HMRC tax-code notices. A P6 changes one employee's code during the year; a P9 (P9X for general changes, P9T for individuals) sets codes for the new tax year, applied from 6 April.
A relief that lets eligible employers reduce their annual employer's National Insurance bill by up to £10,500. It's claimed through your payroll (via the EPS). Not all employers qualify — sole director-only companies, for example, generally can't claim.
Yes — under auto-enrolment you must enrol eligible staff (broadly aged 22 to State Pension age earning over £10,000) into a qualifying workplace pension, with minimum contributions (currently 8% total, of which at least 3% from the employer). Staff can opt out, but you must enrol them first.
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