PAYE11030 - coding: codes: how they are used and calculated: P2 notice of coding

The new P2 was rolled out to all areas in April 2006. The P2 is a personalised communication telling the customer what makes up their code and provides an explanation of each coding item. There is an invitation to make contact for example, if we have used the wrong total income for age-related allowances or if a deduction or allowance is no longer relevant.

Nothing has changed in the way that you calculate a customer’s tax code but the appearance of the P2 has. For most customers their notice of coding will be on one double-sided A4 sheet but some may run to 3 or 4. There will no longer be an accompanying booklet giving explanations of the allowances and deductions.

P2 Special notes are in addition to the standard and automatic notes and must be added when the standard / automatic P2 notes do not give the customer sufficient information to adequately explain the change to their code. An example of this is where the annual rate of National Insurance Retirement pension is coded in the first year the benefit is received, or where an Earlier Year Adjustment has been entered into the code and so on.

The remainder of this subject is presented as follows

Features of the new P2

P2 Automatic notes

P2 Manual issue

P2 Notes for codes with no allowances or deductions

P2 Special notes

P2 Standard notes

P2 Welsh language

Features of the new P2

The new P2

• Is personalised to fit each customer’s circumstances
• Includes the customers tax reference and National Insurance number and gives their HM Revenue and Customs office and phone number
• Explains why customers need a tax code, why they need to check that their code is correct and confirms what their tax code will be for the year, or remainder of the year
• Displays an arithmetical breakdown of how their code is made up, by showing what their personal allowance entitlement is, anything that reduces their tax free amount. For example if they receive benefits in kind from their employer
• Shows ‘a tax free amount’ (where there is a positive figure of net allowances) or ‘a tax is due on amount’ (for K codes where there is a negative allowances figure)
• Gives an explanatory note for each element included in their code, explains how much the customer can earn before they start to pay tax and shows how much will be taxed at each of the tax bands

P2 Automatic notes

As well as the standard and special notes that are included on the P2, there are 10 automatically generated notes that will appear on a customer's P2 under specific circumstances if their tax code has changed during the year.

Further guidance is given at PAYE11020.

P2 Manual issue

Where a COP P2 cannot be issued because of the MCOTP signal the SEES coding assistant should be used to print a P2 for local issue.

P2 for Sub Source
To issue a code to a sub source use the [P2 (Sub) Issue] button at Step 1 of the coding assistant. No entries other than Name and NINO will be required to issue these codes.
P2 for GCD records
To issue a code to a GCD record, complete the coding assistant entries as appropriate and then use the [P2 (GCD) Issue] button at Step 3. The entries made within the coding assistant will be used to determine the correct notes required for the P2 you are printing. You will have to enter the previous net allowances at step 2 to proceed to the P2 Further Information Screen.

P2 Notes for codes with no allowances or deductions

There are standard explanatory notes for codes with no allowances or deductions, used mainly for sub source records. These codes are BR, 0T, D0, NT and FT.

Further guidance is given at PAYE11025.

P2 Special notes

There is provision to add some special notes in certain circumstances. These special notes replace the freehand notes in the function CD format 2 facility in COP.

Further guidance is given at PAYE11035.

P2 Standard notes

There are a number of standard notes that explain how a customer’s tax code is made up. The standard notes are generated automatically based on the allowances and deductions in the customer's code.

Further guidance is given at PAYE11040.

P2 Welsh language

The Welsh language P2 can only be produced by the Welsh Contact Centre.

If you need to issue the P2 in the Welsh language, you should prepare the P2 using the coding assistant.

At Step 3 you should use the [eMail Report] button to send a copy of the coding assistant to the Welsh Contact Centre. When asked if this is a Welsh language customer, select Yes, and a screen will appear for additional messages to be typed before sending to the Contact Centre.

Alternatively, you can fax a printed manual P2 to the Porthmadog Contact Centre on fax number 01766 516100 who will arrange for translation and issue to the customer or agent. You should ensure that you include your name and telephone number with the request in case additional information is required.