HM Revenue & Customs (HMRC) issue a PAYE code to your employer, to tell them what tax-free earnings you are entitled to in a particular pay period, so that tax at the appropriate rates may be calculated on the balance. Your payslips should also show the PAYE code that your employer is using.

Why has my employer sent me a P11D?

Your employer might give you a copy of your P11D if they used it to tell HM Revenue and Customs ( HMRC ) about your ‘benefits in kind’ (for example company cars or interest-free loans). You might not get a P11D if your employer takes the tax you owe on your benefits out of your pay.

HM Revenue & Customs (HMRC) issue a PAYE code to your employer, to tell them what tax-free earnings you are entitled to in a particular pay period, so that tax at the appropriate rates may be calculated on the balance. Your employer is not told how this code has been calculated.

Can an employer change your tax code?

This is not uncommon and HMRC will automatically change your tax code once you have provided your new employer with the correct details related to your previous income and pension.

What happens if my employer uses the wrong tax code?

What happens if my employer uses the wrong tax code? Not using the right tax code inevitably leads to errors in PAYE deductions which can, in turn, result in overpaid or underpaid tax. HMRC tend to approach the employee directly to collect any underpaid tax though, which can be an unpleasant surprise.

Who is liable for the error in my tax code?

What may have happened is that if the code drops during the tax year you will go on a month 1 basis, so they will not collect under paid tax from prior to the change, only going forward. Often HMRC will code this out going forward, unless it is too big – is there an adjustment for this on your 2012/13 coding notice?

What happens if you pay the wrong amount of tax?

If there is an error with your tax code, then you are paying the wrong amount of tax. If you have paid too much then you can reclaim the overpayment, as long as you are within HMRC’s deadlines.

How is your tax code used by your employer?

Your tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension.