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Is my PAYE coding correct? How does HMRC work our tax codes? Why do people ignore their P2 code change notices? Follow the links to expert guidance.

Research by HMRC in 2018 showed that the vast majority of taxpayers who are under PAYE do nothing when they receive a PAYE coding notice.

Why? One important factor seems that the notice looks generic and not personalised. It could also be that people don't like tax and so it's simply easier to put your head in the sand and pretend that it won't affect you.

HMRC issues some 20 million PAYE codes to employees and pensioners each year. Using data collected under PAYE Real Time Information Reporting by employers, HMRC should be capable of generating the correct code for you.

The top causes of incorrect PAYE codes, according to queries to our Virtual Tax Partner service, are:

The Low Incomes Tax Reform Group (LITRG) has issued a guidance note to help taxpayers to check their code is correct.

The LITRG guide includes sections on:

Kelly Sizer, Senior Technical Manager for LITRG, said: 

“You should always check what tax is being taken off your income and query it with HMRC if you do not understand or think it might be wrong.” 

External links

The LITRG PAYE Coding guide

What is LITRG? 

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax regime, tax credits and associated welfare systems for the benefit of those on low incomes. 

The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities. The CIOT’s 17,000 members have the practicing title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.