It is sometimes necessary for an employer or pension provider to put (usually new) employees on an emergency tax code, until HMRC has worked out what that employee’s tax code for the year should be. It usually happens when HMRC do not know enough about the employee’s income or tax details for the full year.
The emergency coding applicable for any tax year is advised to employers in the HMRC Form P9X – Tax codes to use from 6 April.The emergency coding, which is in the form of a numeric tax code with the suffix letters L X, L W1 or L M1, is often used for new employees. The number is the basic personal allowance divided by 10. For example the basic personal allowance for the tax year 2015/16 is £10,600 therefore the emergency taxcode is ‘1060L X’. It only gives the basic personal tax allowance in calculating the tax payable via PAYE and it is normally replaced by a correct code once HMRC has all of the necessary employee information. The emergency code can be operated cumulatively or non-cumulatively (W1/M1) across the various rates of tax.
The emergency tax code is used non-cumulatively where the employee: