My Employee Has Two Tax Codes, Which One Is Right

Employees can sometimes show two different tax codes at the same time, often on payslips, P45s or HMRC notices. This guide explains why tax codes differ, which one to use, how HMRC decides the correct code and what employers must do to stay compliant.

Tax codes are meant to be simple indicators of how much tax an employee should pay. Yet it is common for people to end up with more than one tax code, especially when they change jobs, work multiple jobs, receive benefits or are mid-year adjustments. For employers this creates uncertainty. Which code should you use. What happens if you apply the wrong one. How do you know when HMRC has issued an updated tax code.

The good news is that there is a clear order of priority set by HMRC. Some tax codes take precedence while others should be ignored. Once you know how to interpret them the confusion disappears. This article explains the scenarios where an employee may have two tax codes, how to identify the correct one, what to do if the codes conflict and how to prevent future problems.

Why an Employee Might Have Two Tax Codes

Employees can show more than one tax code for several reasons. This usually happens at points of transition or when HMRC updates records mid-year.

The most common situations include:

  • moving from one employer to another

  • starting a second job

  • receiving a late P45

  • HMRC issuing a new tax code after payroll has already run

  • changes in benefits in kind

  • switching from emergency tax to cumulative tax

  • earlier corrections or underpayments

Understanding the reason behind the conflict makes it easier to decide which code to use.

The Order of Priority: Which Tax Code You Must Use

HMRC sets a very clear rule:

Always use the most recent tax code notice sent directly to the employer.

This overrides:

  • old tax codes on a P45

  • tax codes shown on previous payslips

  • tax codes the employee thinks is correct

  • tax calculations from previous employers

  • anything the employee sees in their personal tax account unless HMRC has issued the employer version

Only one document has legal authority for payroll:

The most recent P6 or P9 tax code notice issued by HMRC to the employer.

If you have received a P6 or P9, that tax code must be used for all future payrolls.

Understanding the Different Documents You Might See

To identify the correct code you need to know what each document is.

1. P45

Given by the employee from a previous employer.
Useful but not final. If HMRC updates the employee’s tax code it replaces the P45 code immediately.

2. P6

A tax code notice HMRC sends to employers when the code has changed.
This is the code you must apply.

3. P9

The annual tax code notice employers receive each year at the start of a tax year.
This also takes precedence over a P45.

4. FPS and EPS history

Your payroll software may show previous codes.
These are not authoritative unless backed by a P6 or P9.

5. Employee’s personal tax account

Employees often check their online personal tax account and see a different code.
This code is only valid once HMRC sends it to the employer via a P6.

Which Tax Code Should You Use in Common Scenarios

Here are the most frequent real world situations and the correct choice each time.

Scenario 1: Employee gives you a P45 but HMRC later sends a P6

Correct answer: Use the P6.
The P6 overrides the P45.

Scenario 2: Employee has two jobs and both employers have different tax codes

This is normal.

HMRC allocates:

  • one job as the main job with the full personal allowance

  • the second job on a BR, D0 or D1 code depending on the tax band

Correct answer: Use whichever tax code HMRC sends your company.
You are not responsible for checking the other employer’s code.

Scenario 3: You see different codes in your payroll software and on the employee’s personal tax account

Correct answer: Use the code in your HMRC P6 or P9 notices.
Ignore the online personal tax account until HMRC sends you the employer version.

Scenario 4: You have not received a P45 or a P6

Use the starter checklist and apply the default code:

  • 1257L cumulative for most new starters

  • or the restricted code if they have another job

Scenario 5: Employee believes the tax code is wrong and requests a change

You must still use the tax code HMRC gave you.
Advise the employee to contact HMRC directly.
HMRC will then issue a new P6 if needed.

Scenario 6: Two P6 notices arrive for different codes

Use the newest P6.
The most recent notice cancels the earlier one.

Scenario 7: A P6 arrives after payroll has already been submitted

Apply the tax code from the next payroll onwards.
Do not rerun the previous month unless HMRC instructs you to.

Why Tax Codes Differ Between Employers

Employees can have multiple tax codes because HMRC splits their allowance across jobs or adjusts for earlier underpayments.

Typical reasons include:

  • multiple employments

  • benefits such as company cars

  • taxable expenses

  • balancing adjustments from previous years

  • tax owed from earlier periods

  • Marriage Allowance

  • tax on state benefits

  • mid-year corrections

Each employer receives a customised tax code based on the employee’s full income picture.

What Happens If the Wrong Tax Code Is Used

Using the wrong tax code can lead to:

  • the employee paying too much or too little tax

  • HMRC flagging discrepancies

  • payroll corrections later in the year

  • employees getting unexpected tax bills or refunds

  • increased admin for the employer

The good news is that errors are fixable through:

  • next month’s payroll adjustments

  • HMRC issuing a new code

  • year end reconciliation

HMRC rarely penalises employers for genuine tax code mistakes as long as they use the latest P6 or P9.

What Employers Must Never Do

There are a few rules you must follow no matter what.

1. Never guess a tax code

Use only HMRC instructions.

2. Never accept a tax code directly from the employee

Employees cannot give you a valid tax code themselves.

3. Never use the tax code on the employee’s personal tax account unless HMRC has sent it to you

Employer codes differ from what employees see.

4. Never alter a tax code manually without HMRC authority

This can cause major tax issues later.

How to Check Which Tax Code Is the Latest

You can confirm the correct tax code by checking:

  • your payroll software inbox

  • HMRC’s Basic PAYE Tools

  • your PAYE online account

  • your accountant’s submissions inbox

Look for:

  • the date issued

  • the sequence of P6 or P9 notices

  • any withdrawn or superseded notices

Payroll software normally highlights the newest code automatically.

What the Different Tax Code Letters Mean

A quick reference helps when employees present conflicting codes.

  • L: standard personal allowance

  • BR: all income taxed at basic rate

  • D0: all income taxed at higher rate

  • D1: all income taxed at additional rate

  • K: employee owes tax from earlier adjustments

  • M or N: Marriage Allowance codes

  • W1/M1: emergency codes

If one code is an emergency version and one is cumulative, the cumulative version is usually the correct one as long as HMRC issued it.

What to Do If the Employee Disagrees With Their Tax Code

Many employees think the lower code is “wrong” because it feels unfair. Explain that the employer cannot override HMRC.

Tell the employee to:

  • check their personal tax account

  • contact HMRC directly

  • update employment details

  • wait for HMRC to issue a new P6 to the employer

You must take no action until HMRC sends you the new code.

Real World Examples

Example 1: Conflicting tax codes on P45 and P6

A new employee arrives with a P45 showing tax code 1257L. Two days later you receive a P6 showing 247L.
Correct code: 247L from the P6.

Example 2: Two employers, different codes

Employee has code 1257L at their main job and BR at their second job.
Both are correct. Use the code HMRC gives you.

Example 3: Employee thinks their code is wrong

Employee sees 1257L in their personal tax account but you have received a P6 telling you BR.
You must use BR until HMRC updates you again.

Example 4: Mid-year correction

HMRC sends a P6 in September changing a code from 1257L W1/M1 to 1257L cumulative.
Apply the new code from the next payroll run.

How to Fix Mistakes If You Used the Wrong Tax Code

If you applied the wrong code accidentally:

  1. Apply the correct code as soon as HMRC issues it.

  2. Payroll software will adjust year-to-date tax automatically.

  3. Overpayments or underpayments are corrected in future pay.

  4. Employee tax records update through the FPS.

If the error spans many months your accountant may need to calculate adjustments manually.

Preventing Future Tax Code Confusion

1. Check your software inbox regularly

Most P6 codes arrive digitally.

2. Enable automated updates

Modern payroll systems sync tax codes automatically.

3. Keep HMRC informed of starter and leaver information

Accurate RTI data reduces incorrect codes.

4. Encourage employees to keep their tax details up to date

Marriage Allowance and benefits affect coding.

5. Review employee pay histories when problems arise

Spotting errors early prevents large corrections later.

Conclusion

When an employee has two tax codes the correct code is always the most recent P6 or P9 tax code notice HMRC has issued to the employer. P45 codes, payslip codes and the employee’s personal tax account do not override HMRC’s employer notice. Once you identify the correct code apply it from the next payroll period and let payroll software handle the adjustments.

The system is designed to correct itself once the right code is used. With accurate records, clear communication and consistent payroll checks you can manage tax code differences smoothly and avoid unnecessary confusion or errors.