How to Read a PAYE Coding Notice (P2) and Get It Corrected (2026/27)

This guide is general information, not advice.

This guide is for anyone who has received a “Tax Code Notice” from HMRC, the form known as the P2, and wants to know what each line means and how to challenge it. It does not explain the individual letters (L, K, BR, D0 and so on); the site’s tax code explainer and how to check your tax code do that.

By the end you will be able to reconcile the number in your code to the allowances and deductions on the notice, know which items you can change yourself online, and know when a corrected code reaches your pay.

Before you start

Have these ready:

• The P2 itself, or the same breakdown from the Check your Income Tax service or the HMRC app (GOV.UK’s tax codes overview lists both).
• Your Government Gateway sign-in. The service says you will be told at sign-in if you need to prove your identity, usually with photo ID such as a passport or driving licence.
• Your National Insurance number. HMRC’s Income Tax enquiries page says to have it with you when you phone.
• Payslips, P60, any P45 from a job you left this year, and the benefit details your employer gave you at year end (a copy of the P11D, if one was sent). GOV.UK says to keep those benefit details for 2 years.

Step-by-step

1. Know what the notice is and why it arrived

HMRC’s PAYE Manual at PAYE11030 describes the P2 as “a personalised communication telling the customer what makes up their code(s)” with “an explanation of each coding item” and “an invitation to make contact” if a deduction or allowance no longer applies. Since 28 October 2015 one form covers all your live employments and pensions.

GOV.UK’s why your tax code might change lists the triggers: a new job, second job or pension, taxable state benefits, untaxed savings interest, a State Pension change, a company benefit starting or stopping, a Marriage Allowance or expenses claim, and owing tax from a previous wrong code. When the code changes, what your tax code means says HMRC “will usually contact you to explain how they worked out your individual tax code”.

2. Read the sections

PAYE11030 sets out what the form shows: your employments and pensions and NI number, your Personal Allowance entitlement, “anything that reduces their tax free amount”, a “positive or negative tax-free amount”, a numbered note for each element, and how much will be taxed at each band. The notes come from a fixed list at PAYE11040. The ones you are most likely to meet:

• Allowances. “Personal Allowance” is note 1 whenever present; Blind Person’s Allowance and a Marriage Allowance transfer appear here too.
• Reliefs and expenses. Flat rate job expenses, professional subscriptions, higher-rate personal pension relief.
• Untaxed income. “Interest without tax taken off”, “Part time earnings”, “Property income”, “State pension”: HMRC reduces your tax-free allowance so the tax is collected through your main job.
• Benefits. “Car benefit”, “Fuel benefit”, “Medical insurance”, “Benefits in Kind”, “Van benefit”, at the value your employer reported.
• “Underpayment restriction present”. The manual’s wording: “We previously told you that you owe £X tax from an earlier tax year. We have therefore included an adjustment to reduce your tax-free allowance by £Y so we can collect the £X tax in equal instalments” by 5 April.
• “Adjustment to tax rate bands” (more than one job or pension, some income estimated at a higher rate) and “Child Benefit Charge”.

The manual’s list of P2 notes does not include your estimated income from each job and pension; GOV.UK lists that among what Check your Income Tax shows. If the estimate is wrong, everything built on it is wrong too.

3. Rebuild the number

GOV.UK’s method, from what your tax code means: start with the Personal Allowance, take off income you have not paid tax on and other deductions in the code, then “replace the final digit with a letter”. In practice that is the tax-free amount divided by ten with the remainder dropped. The 2026/27 Personal Allowance in the site’s ruleset is £12,570, so with nothing taken off the code is 1257L. GOV.UK’s own example is £1,570 of medical insurance: £12,570 minus £1,570 = £11,000, code 1100L.

Where deductions exceed the allowance the tax-free amount goes negative and a K code results. If HMRC changes your code mid-year and extra tax is due, the new code carries an In Year Adjustment Restriction and runs on a week 1 or month 1 basis, per PAYE11100: the shortfall is grossed up at your rate and scaled to the days left in the year.

4. Correct it online

GOV.UK’s if you think your tax code is wrong says a wrong code is “usually because HMRC has incorrect or missing information” and the online service “is the quickest way to check and update your details”. Sign in to Check your Income Tax and:

• Update estimated income. The service lets you “update details of your income from jobs and pensions”: pay rise, part-time hours, a second job.
• Remove or add a benefit. GOV.UK says you must tell HMRC about benefits you start or stop getting, even if your employer has already taxed them, and to report a company car only once you have started using it.
• Change or end a job. The service lets you “update your employer or pension provider details”. If you left a job without a P45, ask the old employer for one; GOV.UK says it helps HMRC update your record.
• Claim expenses you are entitled to tax relief on, from the same page.

5. Phone only where the online route is closed

GOV.UK gives three cases: you cannot use Check your Income Tax “if Self Assessment is the only way you pay Income Tax”; if you cannot use the online service at all, contact HMRC; and if you have just started a new job, “wait 35 days for HMRC to get your new income details before contacting them”. The Income Tax helpline is 0300 200 3300, Monday to Friday 8am to 6pm per HMRC’s contact page.

Deadlines and what happens next

• New code issued: if HMRC agrees, it will “tell you and your employer the new tax code within 15 working days”.
• On your pay: monthly paid, “your next or the following payslip”; weekly paid, “your third payslip”. If it is not there, speak to your employer.
• Tax over-deducted this year: where HMRC has all your income details, it asks your employer to refund the difference in your pay, usually when the new code is first used.
• Tax under-deducted this year: HMRC adjusts the code to collect it “over one or more tax years, if possible”.
• After the year ends: a P800 tax calculation or Simple Assessment letter, sent between June and March of the following tax year. An underpayment under £3,000 is usually collected through your code in equal instalments over 12 months from the start of the following tax year; if HMRC cannot collect it that way, it writes to you about how you can pay.

Common mistakes

• Reading the benefit line as a tax bill. It is the value that reduces your tax-free amount; the tax is that value at your marginal rate.
• Ignoring the estimated income. It sits in the online service, not on the paper, and a stale figure drives any in-year restriction.
• Phoning in the first 35 days of a new job. GOV.UK asks you to wait so both employers’ details can arrive.
• Treating the P2 as final. The P800 or Simple Assessment reconciles actual pay against the code; if its figures are wrong, tell HMRC which amounts are incorrect and what they should be.

Worked example

Personal Allowance of £12,570 and basic rate of 20% from the 2026/27 ruleset; method from GOV.UK’s what your tax code means and the gross-up in PAYE11100.

You have one job, employer-paid medical insurance worth £1,570 (GOV.UK’s example figure), and HMRC is collecting £400 you owe from an earlier year through this year’s code at basic rate.

Line on the P2	Amount
Personal Allowance	£12,570
Less: medical insurance	£1,570
Less: underpayment restriction (£400 grossed up at 20%)	£2,000
Tax-free amount	£9,000

Drop the final digit and add the letter: 900L. The restriction line is how £400 of tax becomes a £2,000 reduction in allowances: 20% of £2,000 is £400, collected in equal instalments across the year. If the medical insurance ended and you tell HMRC online, the code becomes 1057L.

Related reading

• How to check your tax code - the quick checklist for whether the code you have is the code you should have.
• Tax code explainer - every letter and prefix, K codes and the W1/M1/X basis.
• Emergency tax: what to do - the new-starter path, including the 35-day wait.