In this section:

Taking on a new employee
Employment status: employed or self-employed?
New employee: using the right tax code
New employee - special situations
When an employee leaves or retires
If an employee or pensioner dies
File your PAYE in-year forms online: P45, P46, etc
Common errors to avoid when filing forms P45 and P46 online

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New employee: using the right tax code

New employee: using the right tax code

To make sure you deduct the right amount of tax from an employee's pay you'll need to use the right tax code. You'll find this on a new employee's form P45 Details of employee leaving work, if they give you one. If they haven't got a P45 you'll need to follow the instructions on form P46.

Once you know the right tax code, you enter it into payroll software or the free P11 Calculator on the Employer CD-ROM from HM Revenue & Customs (HMRC), to work out the deductions for you automatically. You can also use paper methods, but this is more time consuming and prone to error.

This guidance - which should be read in conjunction with the related guide 'Taking on a new employee' - will help make sure you use the right code for a new employee.

On this page:

Tax code when employee has a P45
Tax code when no P45 - form P46 completed
Tax code when P45 received after employee's first pay day
Changes to your employee's tax code
Start of a new tax year - new tax codes
Help and advice
More useful links

Tax code when employee has a P45

If your new employee has a P45 you'll need to check that the figures on it are correct and use the correct figures if they're not. For details of how to do this read the guide 'Taking on a new employee' if you've not yet done so – there’s a link at the end of this section.

Use the table below to work out what tax code to use. Find the date they left their previous employment in the first column, and their start date with you in the second column – then use the tax code listed in the third column.

Enter this tax code into your payroll software or the P11 Calculator, or in box K if you’re setting up a paper P11 for the employee.

Employee’s date of leaving (item 4 on P45)	Employee’s start date with you	Tax code to use
6 April 2009 to 5 April 2010	On or after 6 April 2009	Use the code on the P45
7 September 2008 to 5 April 2009	6 April 2009 to 24 May 2009	Use the code on the P45, but add 44 to any code ending in L
7 September 2008 to 5 April 2009	On or after 25 May 2009	Emergency code 647L on a week 1/month 1 basis
6 April 2008 to 6 September 2008	6 April 2009 to 24 May 2009	Use the code on the P45, but add 104 to any code ending in L
6 April 2008 to 6 September 2008	On or after 25 May 2009	Emergency code 647L on a week 1/month 1 basis
Before 6 April 2008	6 April 2009 to 5 April 2010	Use code 647L on a week 1/month 1 basis

To find out more about week one or month one tax codes read the guide 'Understanding employee tax codes' – there’s a link below.

The emergency tax code for the tax year 2009-10 is 647L. The emergency code changes once each year and you can also find it published in HMRC’s publication Employer Helpbook E12, 'PAYE and NICs rates and limits'. You'll find this on HMRC’s website and on the latest Employer CD-ROM, or you can order paper copies. Make sure you use the most up-to-date version of E12 – check the dates on the front of the booklet.

If you still don't know which code to use and you’re a new employer or have fewer than three years’ payroll experience, call HMRC’s New Employer Helpline on Tel 0845 607 0143. Otherwise call HMRC’s Employer Helpline on Tel 08457 143 143. Both helplines are open from 8.00 am to 8.00 pm Monday to Friday and from 8.00 am to 5.00 pm on Saturdays and Sundays.

Taking on a new employee

Understanding employee tax codes

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Tax code when no P45 - form P46 completed

If your employee doesn't have a P45 they'll need to complete form P46. (Read the guide 'Taking on a new employee' for more on this.)

In the Tax code used part of section two on the P46:

tick box A, B or C in line with the box ticked in section one
enter the tax code indicated in the table below
enter this in the 'Tax code used' field of your software or Box K on the P11

Box ticked on form P46	Tax code to use
A	647L cumulative
B	647L week 1/month 1
C	BR cumulative
None	BR cumulative

Taking on a new employee - read the details

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Tax code when P45 received after employee's first pay day

If an employee gives you a P45 after their first pay day and you've already received the employee's tax code from your Tax Office, destroy the P45.

If you've haven't yet received a tax code for them proceed as follows:

If you use commercial payroll software

Check the P45 figures and decide which tax code to use by following the instructions in the earlier section Tax code when an employee has a P45.

Follow the instructions on your software to update your employee's details - most payroll packages should do this for you automatically but you'll need to check this.

If you use the P11 Calculator

If you use the P11 Calculator on the Employer CD-ROM you'll need to:

check the P45 figures and decide which tax code to use by following the instructions in the earlier section Tax code when an employee has a P45
enter the employee's new tax code in the employee database
adjust the employee database entries for the week they started to reflect the Gross pay and Total tax to date figures from the P45, or use the correct ones if the P45 found errors

If you complete a paper P11 and the employee doesn't have a week one month one tax code

unless the employee's P45 shows a week one month one tax code - enter in column 3 of the P11 on the line immediately above the one you used for the employee's first payment the 'Total pay to date' shown at item seven of the P45 (use the correct amount if the P45 check found any errors)
similarly, in column six on the line immediately above the one you used for the employee's first payment enter the P45 'Total tax due' figure shown at item seven (or the correct amount if the P45 check found any errors)
on the next pay day include these amounts in the 'Total pay to date' and 'Total tax due' figures that you enter at columns three and six of the P11

The entries in columns three and six will now be fully up to date and correct to carry forward.

Example: updating a paper form P11

An employee without a P45 starts in week 34 and you ask her to complete a P46. She completes the P46 and ticks statement B. In accordance with the P46 instructions you start to operate an emergency code on a week one month one basis (647L X).

In weeks 34 and 35 you pay her £700 and enter this amount on the P11 at column two for each of those weeks ('Pay in the week or month').
In weeks 34 and 35 you deduct tax of £115.00 and enter this amount on the P11 at column 7, Tax deducted or refunded in the week or month, for each of those weeks.

Before the next pay day, week 36, the new employee gives you her P45 which shows that:

her tax code is 647L, emergency code on a cumulative basis
she has already received £13,000 of pay to date this tax year
she has already paid tax of £1852.20 this tax year

You check the date of the P45 and the figures - everything is correct.

In order to update the P11 to take account of the newly received P45 figures you proceed as follows:

at week 33 (the week before the employee started) in column three ('Total Pay to date) you enter £13,000
at week 33 (again the week before the employee started) in column six ('Total tax due date') you enter £1852.80

At week 36, the first pay day since you received the P45, you make your next payment and further update the P11 as below:

you pay the employee £700 at week 36 and enter this amount at column two
you then add up all the pay figures from column two and enter the 'Total pay to date' into column three - this is £13,000 (from the P45) + £700 (week 34) + £700 (week 35) + £700 (week 36) = £15,100
next you work out what the total tax due to date on £15,100 should be at week 36
this comes to £2,122.80 arrived at as follows: £15,100 less free pay of £4,485.96 (£124.61 x 36) = £10,614.00, which is taxable at 20 per cent = £2122.80
you enter £2,122.80 at week 36 column six ('Total tax due to date')

Finally you need to calculate what tax, if any, is actually due at week 36 taking into account what has already been deducted so far. You work this out as shown below:

£2,122.80 (total tax due on £15,100) less £1,852.20 (tax shown as already paid on the P45) less £115.00 (deducted at week 34) less £115.00 (deducted at week 35) = £40.60 due for week 36
you therefore enter £40.60 at week 36 column seven ('Tax deducted or refunded in the week or month')

Your P11 entries are now fully up to date and correct to carry forward.

If you complete a paper form and the employee gives you P45 with a week one month one tax code after their first pay day

If the employee gives you a P45 with a week one month one tax code after their first pay day, enter 'nil' as the previous pay and tax details in columns three and six of the P11 on the line above the one you will use for the employee's first payment.

Remember - if you've already received a tax code from HMRC by the time your employee gives you their P45, destroy their old P45 and use the tax code HMRC has sent you instead.

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Changes to your employee's tax code

HMRC may tell you to change an employee's tax code if their personal circumstances change. They'll do this by sending you a form P6. They can't tell you why the tax code's changed because it's confidential. But they'll explain the reason to your employee when they tell them about the change.

When you get a P6, you must use the new tax code from the next pay day onwards unless HMRC gives you a different start date.

Start of a new tax year - new tax codes

If any tax codes need to change because of the Pre-Budget Report, HMRC will send you a form P9X telling you how to make any generic changes. For example, they might tell you to increase all codes ending in L by 12 so that the old code 510L becomes 522L. Individual changes will be notified to you on forms P9(T).

There may be some more changes to make after the start of the new tax year as a result of the Chancellor’s spring Budget Statement. If so, HMRC will tell you what action you need to take on form P7X which will be included on an updated Employer CD-ROM.

Find out about new tax codes at the start of a year

Receiving tax codes from HMRC

Increasingly, HMRC is sending tax code notices to employers online. You will start receiving your tax codes online as soon as you register for the HMRC ‘PAYE Online for employers’ service. Most employers must now register for PAYE Online in order to meet the requirement to file their Employer Annual Return online.

There are two ways of accessing the tax codes that HMRC sends online to you. You can:

Log on to the ‘PAYE online for employers’ service on the HMRC website and choose the ‘tax code notices’ option. If you provide the service with an email address, it will send you an email alert each time HMRC sends you an update.
Use the PAYE Desktop Viewer (PDV). This is an application that you can download and install from the HMRC website. It is particularly suitable for employers expecting to receive a lot of tax code notices from HMRC.

You can a`lso ask HMRC to resume sending paper versions of your tax code notices.

How to download PAYE Desk Top Viewer (PDV)

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Help and advice

For more information about dealing with forms P45 and P46 when taking on a new employee, follow the links below for answers to common questions.

Common questions about form P45

Common questions about form P46

If you still can't find the information you need, you can ask a question through HMRC’s email query service.

Send an email query about completing form P45

Send an email query about completing form P46

Alternatively you can get advice from HMRC’s Employer Helpline on Tel 08457 143 143, open from 8.00 am to 8.00 pm, Monday to Friday and from 8.00 am to 5.00 pm, Saturday and Sunday, except Christmas Day, Boxing Day and New Year's Day.

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