These codes instruct your payroll software on how much tax-free allowance to apply before calculating the PAYE deduction for a staff member.
| Code | Employer's Action / Operational Meaning |
|---|---|
| 0T | No Personal Allowance is applied. Tax is deducted from the first £1. Often used when a new starter has no P45 and fails to complete a Starter Checklist. |
| BR | Basic Rate: Deduct a flat 20% with no tax-free allowance. Typically used for staff with a second job or those receiving a pension alongside their salary. |
| C (Prefix) | Welsh Taxpayer: Apply Welsh income tax bands. Ensure your payroll software is configured for the correct jurisdiction. |
| D0 | Higher Rate: Deduct a flat 40% on all income from this source. Common for high-earning leadership roles with multiple income streams. |
| D1 | Additional Rate: Deduct a flat 45% on all income. Applied to earnings over £125,140. |
| K (Prefix) | Negative Allowance: Applied when an employee's untaxed income (e.g., benefits in kind) exceeds their allowance. You must collect the extra tax, but the deduction cannot exceed 50% of their gross pay. |
| L | Standard Allowance: The default for most staff entitled to the standard Personal Allowance (£12,570 for 26/27). |
| M / N | Marriage Allowance: Indicates a transfer of allowance between spouses. Handled automatically via HMRC coding notices (P9). |
| NT | No Tax: Do not deduct Income Tax. Ensure you have a specific instruction from HMRC before applying this. |
| S (Prefix) | Scottish Taxpayer: Use Scottish tax bands (Starter, Intermediate, etc.). This is critical for MATs operating across the border or employing remote staff based in Scotland. |
| T | Used where HMRC needs to manually review the employee's affairs or to keep specific financial details private from the employer. |
| W1 / M1 | Non-Cumulative (Emergency): Calculate tax based only on the current pay period's earnings, ignoring their year-to-date (YTD) figures. |
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