How to check an employees tax code is correct

Published: 2022-04-15
Author: Cheri Bartlett

Since the introduction of real time information (RTI), this has enabled HMRC to gather employment information together for an individual. If an employee's tax code is wrong, they could end up paying too much tax or worse still, too little! No one wants to find out they owe money to HMRC.

But how do you check an employees tax code is correct? The short answer is:

You can't!

But there are things you can do to help your employee.

It is actually the employees responsibility to make sure they are on the right tax code. There are a number of reasons why an employees tax code could end up wrong but the most important thing an employer can do is make sure they are checking for any tax code notices regularly, applying them and letting the employee know if it it has changed.

Where to find tax code notices

HMRC send employers tax code notices in one of two ways:

  • By sending a letter - ‘Notice to employer of employee’s tax code'

  • By internet notification if you are registered to receive them through PAYE online.

When to apply the tax code

When you receive the notification it will be either a P6 (in year tax code change) or a P9 (new tax year change) and will have a date telling you when the tax code should be applied from.

  • P6 - normally applied from when you pay your employee next. There is no need to go back and change the tax code for previous payments as the tax code that has been sent will account for those payments.

  • P9 - normally applied to payments from the 6th April for when the new tax year starts.

What happens if an employee disagrees with the tax code?

If an employee thinks the tax code is incorrect, they need to contact HMRC and get them to review their personal tax account, and if needed then HMRC will issue a new tax code. Employers have a duty to apply the tax code supplied as it has been based on information that HMRC have on the employee. If there is a tax code change, the code may be sent within 24 hours.

Here are some handy links to give employees:

Why is it good to receive online notifications?

Tax code notice within PAYE online government gateway account

By receiving notices online, you'll receive an email first from HMRC telling you to check your online account for a new notification relating to Tax Notices (P6) or (P9). You'll also get notifications about student loans and employees national insurance numbers. It means not having to wait up to a week for a letter to come through the post. Also with Shape, you can check for these notifications within the software and apply it straight to your employee ready for the next pay run. To find out more read our help article Manage PAYE notices in Shape. There's also a handy guide on where to look within your PAYE online account to turn notifications on if you are still receiving them by post.