In the 2024/2025 tax year, the basic tax code is 1257L
Week1/Month1
Tax codes with a W1 or M1 suffix ignore year to date values. The tax calculates using the gross pay for the current period only. The tax allowance is for the first week or month of the tax year, regardless of the actual tax period.
Ni category
An employee pays national insurance (NI) contributions to qualify for certain State benefits.
Select this if there’s a dispute with the employee. This doesn't prevent the employees' payments. It will display a reminder during the pay run, at the Edit Pay stage.
RTI Pay ID
Every employee has a unique employee reference for your company. It's included in submissions to HMRC.
The payroll assigns unique reference numbers to all new employees.
What if I'm transferring from another payroll system? If you’re adding a new employee who has had no previous processing: Leave the RTI Pay ID blank
If you add an employee already processed in your previous payroll system: Enter the RTI Pay ID from your old system
If your previous payroll system was HMRC Basic Tools, or you don't have access to the RTI Pay ID: Get the HMRC Employer Helpline from gov.uk and ask for the employees RTI Pay ID.
If the employee is a director of the company, select the Is a Director check box.
Directorship Started
Specify whether the employee became a director in a previous tax year, or during the current tax year. If the directorship started in the current tax year, you must also specify the start date.
Preferred Calc Method
You can calculate Directors’ NI in two ways.
Each method gives the same NI liability amount at the end of the tax year. NI payments within the tax year can vary under the two methods:
Calculate NI Cumulatively This is the default calculation method. Use if you pay your director in regular intervals. It uses annual earnings thresholds to determine the director's NI liability in a pay run.
Calculate NI Per Pay Run
Sometimes called the alternative method. It uses weekly or monthly earnings thresholds to determine your director's NI liability. It doesn’t reference other pay runs.
Use this if you pay your directors in regular periods. It produces an average NI liability in each pay run. A balancing calculation then happens using year to date earnings thresholds. This makes any necessary corrections to the director’s NI liability.
To change your employee from a director to a standard employee you’ll need to edit the employee record. Go to the Employees tab and select the relevant employee record. Under Directorship clear the Is a Director checkbox.
After you complete all relevant fields, selectSave.
TIP:The employee NI calculates on a cumulative basis until the end of the current tax year. Next tax year, the NI calculation method will revert to Per Pay Run.
An established employee brings you a P45 from the current tax year
HMRC informs you of an employee tax code change (P6 or P9)
If your new employee has a P45, you’ll use the section Employee Declaration: P45.
If your employee has no P45, you’ll use section Employee Declaration: P46.
If you're unsure what to use when creating a new employee, you can check the HMRC online tool at gov.uk.
Starting Basis
Description
This is an existing employee
Select this option if you’re setting up an employee who already works for you and you pay them in the normal way. For example, if you’re setting up for the first time, you need to set up your existing employees.
Employee Declaration: P45
Select this option if the new employee has presented a P45 Part 3 issued by their previous employer. Then choose one of the following options:
Circumstance A
Use this if it's the employee’s first job since 6 April and they haven’t received any of the following:
Taxable Jobseeker’s Allowance
Employment and Support Allowance
Taxable Incapacity Benefit
State or occupational pension
Circumstance B
Use this if it's the new employee’s only job, but since 6 April any of the following apply:
They’ve had another job
They have received taxable Jobseeker’s Allowance
They have received Employment and Support Allowance
They have received taxable Incapacity Benefit
This also declares that they don’t receive a state or occupational pension.
Circumstance C
Use this if the new employee:
Also currently has another job
Receives a state or occupational pension
NOTE:If you’re unsure which circumstance to use, you can use the HMRC online tool at gov.uk.
Employee Declaration: P46
Select this if the new employee doesn’t have a P45 from their previous employer. Then choose one of the following options:
Circumstance A
Use this if it's the employee’s first job since 6 April and they haven’t received any of the following:
Taxable Jobseeker’s Allowance
Employment and Support Allowance
Taxable Incapacity Benefit
State or occupational pension
Put the employee on a 1257L tax code.
Circumstance B
Use this if it's the new employee’s only job, but since 6 April any of the following apply:
They’ve had another job
They have received taxable Jobseeker’s Allowance
They have received Employment and Support Allowance
They have received taxable Incapacity Benefit
This also declares that they don’t receive a state or occupational pension.
Use the tax code 1257L on a 'Week 1/Month 1' basis.
Circumstance C
Use this if the new employee:
Has another job
Receives a state or occupational pension
Payroll applies a BR tax code. There's no free pay allowance and gross pay gets taxed at 20%.
Use the tax code BR
Unknown
Use this if you don’t have enough information on the employee to complete a P46.
This applies a 0T tax code on a Week 1/Month 1 basis with no free pay allowance. Tax calculates as normal, at 20%, 40% or 45% depending on the employee’s earnings. Employees must contact HMRC to ensure they issue the correct tax code.
NOTE:If you’re unsure which circumstance to use, you can use the HMRC online tool at gov.uk.
Depending on the Start Basis you chose, enter the following details:
NI Category
The employee’s National Insurance category. Specify this for new employees. The letters are A, B, C, J, H, M and Z.
Employees under 16 normally use letter A. This confirms the employee isn't due to pay NI. This isn't payable until they turn 16.
See the gov.uk site for more information about child employment.
Tax Code
The tax code determines the tax allowances your employee gets. Enter this if the employee already works for you or has presented a P45 Part 3.
The tax code is on the P45 Part 3.
If the new employee doesn't present a P45, they must complete a P46. This says which tax code they should be on.
HMRC will notify you if the employee's tax code needs updating.
Leaving Date
The date the employee finished their previous employment.
Week 1/Month 1
If your employee’s tax calculates on a week 1/month 1, or non-cumulative basis, select this check box. This bases the tax on their pay in the current period, instead of cumulative for the full year.
Final Pay Period
The week or month of your employee’s final pay run in their previous employment.
Total Pay to date
The total amount of pay your employee has received in the tax year to date, if any. You can get this from their P45 Part 3.
If they're set to Week 1/Month 1, set this value to zero.
Total Tax to date
The total amount of tax paid by your employee in the tax year to date, as specified on their P45.
If they're set to Week 1/Month 1, set this value to zero.
If they use a cumulative tax code, Payroll calculates their total tax liability for the tax year to date based on:
The employee’s tax code
The final pay period
Total pay to date
The calculated value should agree with the P45 Part 3. If the values don’t agree, the Calculated P11 Tax appears. This specifies the calculated value.
The calculated value adds onto the P11. It's then used for tax calculations, rather than the value on the P45.
Student loan
Select this if the previous employer deducted student loan repayments.
NOTE: 
TIP: