What is an employee's code?
An employee's tax code consists of one, two, three or four numbers followed by a suffix letter: F, M, N or S. There are also three non-numeric codes:
NT - No Tax deducted
SB - No allowances and tax to be deducted at the lower rate using Table D and Table C if applicable
HR - No allowances and tax to be deducted at the higher rate using Table C
What is the purpose of the suffix letters?
The purpose of the suffix letters is to enable code numbers to be altered without having to issue individual revised codes for each employee when changes are announced in the amounts of personal allowances after the Budget.
What should I do if an employee's code changes?
Operate the new code for all payments made after the effective date shown on the Notice. Do not recalculate the tax due in respect of previous payments.
How will I know what code to use for the new tax year?
A T6 form will be issued in mid March, giving details of the codes to be used in respect of each employee.
If no notification is received by 5th April, please contact the Income Tax Division who will arrange for a code to be issued. In the meantime, continue to use the previous year's code.
I have not received a code for one of my employees. What should I do?
If you have not received notification of the Code by 5 April, please complete form T20 for each of those employees marking it 'substitute' and forward it to the Income Tax Division. Until a new code is received, continue to operate the previous year's code or if you do not have one use the Emergency Codes.
For employees (other than non-residents) where a code has not been advised by T6 or T21 Part 2, the Emergency Codes to be used are:
- Person in subsidiary employment SB 10/20% Tables D/C
- Person receiving State Retirement Pension SB 10/20% Tables D/C
- All other cases 1250S* 10/20% Tables D/C
*with effect from 6 April 2017
Under no circumstances use the employee's own Notice of Coding - T1. The authority to operate a code for an employee is the Form T6 sent to you by the Income Tax Division or form T21 from a previous employer.
What should I do if I receive a code for someone who no longer works for me?
Complete form T21 marking it 'substitute' and forward all three parts to the Income Tax Division.
What code should I use for an employee who commences after the 6 April and does not bring me a form T21?
In these cases the Emergency Code should be implemented.
Will a code be issued whenever a new employee has been taken on?
If the code on Form T21 is incorrect, or needs updating, a revised code will be issued by the Income Tax Division. However, if the code is correct you may not be sent a revised code.
How is the code calculated?
The code is calculated from details on your employee's annual Income Tax Return. The employee receives a breakdown of how the code is arrived at, on Form T1, while the employer is simply advised of the code itself. Any appeal against the code issued should be made by the employee not the employer.
It is very important that every employee notifies the Income Tax Division promptly of any change in circumstances.
What code should I use for a female employee whose circumstances change?
Continue to operate the code in use until a revised code is issued to you by the Income Tax Division.
IMPORTANT- Failure to implement the correct code may result in the employer being liable for any ITIP that should have been deducted.