PAYE11015 - coding: codes: how they are used and calculated: codes for special cases

By using the normal tax codes, those made up of a number and a suffix, we can collect the correct amount of tax from the majority of taxpayers. However, these codes do not work for all taxpayers. There are a number of special codes you can use to ensure these taxpayers are covered by the coding system.

Below is a brief guide to these codes.

Code BR

Code DO

Code FT

Code NT

Emergency Code

K Code

Code BR

There is no number, prefix or suffix. The employer deducts tax at basic rate from all the payments. This gives no allowances and ignores lower and higher rates.

Use code BR

• Mainly for sub-sources

But also

• For new employees whose pay is over £1 per week (or £4 per month)

And

Or

Code DO

Includes the prefix letter D followed by the single number '0'. There is no suffix. The code charges the full taxable pay at the higher rate. So, for 2004-05 on total pay of £5,000 an employer using code D0 will deduct £2,000 tax (£5,000 @ 40%).

Use code DO when

• Tax is due at the higher rate and allowances are fully given elsewhere

Code FT

The letter F means 'farm worker'. The letter T is a suffix. The employer deducts a stated amount, or nothing, from the pay at the end of the contract.

Use code FT

• Only for a farm worker employed under a hiring contract

Note: The rules are set out in PAYE23025

Code NT

The letter N means 'no tax'. The letter T is a suffix. The employer deducts no tax from the pay at this source .

Use code NT

• Only in cases clearly within the list available in PAYE11010

Emergency Code

The emergency tax code is a number followed by suffix L. The number is the Personal allowance without the final figure for example the emergency code for 2005-2006 is 489L. The emergency code can be used on a cumulative or non cumulative basis (week 1 or month 1).

The employer uses the emergency code

• For new employees whose pay is above the PAYE threshold

And

And

• For employees for whom the employer has received no code notice
• In certain special cases, for example, when a P45 produced after 24 May is for the preceding year

K Code

Includes the prefix letter K followed by a number in the range 1 to 9999. There is no suffix. Instead of deducting free pay, the employer uses Tax Tables A to calculate an additional amount. This is added to the employee's pay each pay day to arrive at the taxable pay. The tax deducted on any one day cannot exceed 50% of the gross pay for that period. The employer will collect any shortfall on a later pay day if possible.

A K code is generated automatically by COP when coding deductions are more than the allowances.