Employees
Ronald Reagan
"Its true - hard work never killed anybody. But I figure, why take the chance?"
What is my PAYE code for?
Pay As You Earn (PAYE) tries to collect the correct amount of tax and national insurance due from your employment income over the course of a tax year - not just on your salary but on other items such as benefits in kind. To do this, HMRC have to try and decide in advance how much tax you should pay for the coming tax year.
The PAYE code is the key to getting your tax payments correct. There is a detailed explanation of each element of the code at the link below :
https://www.gov.uk/tax-codes/what-your-tax-code-means
First, HMRC will include any allowances that are due to you, such as the personal allowance. By putting the allowance in your PAYE code you will receive the correct tax free amount through the PAYE system.
On the PAYE code notice you may see a number of deductions. These might be -
• an underpayment of tax from an earlier year or the current year
• a benefit in kind, such as a company car or medical benefit
• untaxed income from another source - such as bank interest or a state pension
By including these items in your code, the PAYE system will collect the tax due on these amounts as well as on your salary.
It is important to check that the figures on your PAYE code are correct - otherwise you may pay too little or too much tax.
Remember, HMRC may not have all of the latest information - if you have changed company car or if you have changed employment with a different benefits in kind package.
Call HMRC on 0300 200 300 if you have any doubts as to whether your code is correct.
What is an 'emergency' PAYE code?
An emergency code will be applied because your employer has to operate a PAYE code but hasn’t received a code notice from HMRC.
Revenue & Customs will need more information to issue the correct code - this may be because you have started your first job or that you did not give your new employer the P45 your previous employer gave you when you left your last job.
To have the code corrected you should contact HMRC.
Am I an employee or self employed?
Determining your correct status - employed or self employed - is important for tax purposes. If you are self employed you are responsible for accounting for your own tax and national insurance.
The rules to decide employment status are complex but HMRC have produced a tool which will help to determine the correct status :
Can I claim expenses against tax?
You might be able to claim tax relief for expenses if you have paid for something which relates to your employment but your employer has not met the cost. To claim against tax you must -
• use your own money for things that you are required to buy for your job
• only use these things for your work
Claims for expenses can cover the current tax year and the four previous tax years. Details of the available claims are at the link below :
https://www.gov.uk/tax-relief-for-employees
A word of warning - The BBC has reported that HMRC have recently publicised claims agents who are making fraudulent tax repayment claims in the name of their clients.
Will my employment overseas be taxable?
The extent of your UK tax liability may depend on a number of factors -
• your residence status
• the location of your employer
• your employment contract
• the place you perform your employment duties
• the double taxation treaty between the UK and another country.
If you are performing employment duties in another country, you may be taxable on some or all of your employment income in that country.
Please contact us if you need detailed advice.
Need Help?
Do you need help with any of the issues discussed on this page?
If you need assistance with UK tax filing we can complete and file a return for you with all tax calculations taken care of.
We can agree a fixed fee in advance.
Contact us for details
Benefits in Kind
HMRC have announced that all employers who provide benefits in kind to their employees must report the benefits through payroll from April 2026. This method of reporting benefits is currently available on a voluntary basis although most employers report the benefits at the end of the tax year by preparing a P11D for each employee.
There is a summary of benefits in kind and their tax treatment at the link below :
https://www.gov.uk/expenses-and-benefits-a-to-z
Based on information reported by employers on the P11D, employees pay income tax on their benefits through self-assessment or HMRC collect it through an adjustment to the employee’s PAYE code. From April 2026 the tax (and national insurance, where required) will be paid through PAYE.
Although employee tax on benefits will be paid through PAYE, the employer Class 1A National Insurance liability will still have to be reported and paid separate of payroll, using the P11D(b) procedure.
HMRC have said that it is probable that some types of benefit may not be suitable to be included within payroll so the P11D return may need to be retained. New legislation and guidance is due to be published before April 2026.