PAYE11030 - Coding: codes: how they are used and calculated: P2 notice of coding
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.
For most customers their notice of coding will be on one double-sided A4 sheet but some may run to 3 or 4.
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 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 P2
The 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 P2 cannot be issued because of the Manual Correspondence indicator, check the reason why the indicator is set using Contact History (cancel the indicator if appropriate). Issue a P2 from the system. If capacitor details or correspondence address details appear on the individual’s record then any printed output will be directed to the relevant address.
P2 Notes for codes with no allowances or deductions
There are standard explanatory notes for codes with no allowances or deductions, used mainly for secondary source records. These codes are BR, 0T, NT, or D prefix.
Note: Where tax code 0T has been calculated for a primary employment which contains allowances and / or deductions, a P2 will be issued.
Further guidance is given at PAYE11025.
P2 Special notes
There is provision to add some special notes in certain circumstances.
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
Where the Welsh language indicator is set on the individual’s record then any printed output will be directed to the Welsh Contact Centre to issue the P2.
