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 individuals. However, these codes do not work for all individuals. There are a number of special codes you can use to ensure these individuals are covered by the coding system.

Below is a brief guide to these codes.

Code BR

Code D0

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 higher rates.

Use code BR

• Mainly for secondary sources

But also

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

And

• Who have failed to tick any of the form P46 statements A, B or C

Or

• Have ticked form P46 statement C

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Code D0

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 2007-2008 on total pay of £5,000 an employer using code D0 will deduct £2,000 tax (£5,000 @ 40 per cent). The Employer Help book E13 instructs the employer to always use the code on a week1 / month1 basis.

Use code D0 when

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

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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. The Employer Help book E13 instructs the employer to use the code on a week1 / month1 basis.

Use code NT

• Only in cases clearly within the list available in PAYE11010 

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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 2009 - 2010 is 647L. 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

• Who produce no form P45 when they start in the job

And

• Who declare on from P46 that the job is their only or main job

• 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

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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 per cent 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 the system when coding deductions are more than the allowances.