Check what a tax code means
Every UK tax code explained, with exact tax-free pay for each pay schedule.
On a £3,000 monthly salary, code NT takes the income tax deduction from £390.20 to £0.00 while leaving £156.16 of employee National Insurance in place. HMRC's PAYE Manual allows the code only "in cases clearly within the list" it publishes, and directs its staff to record a reason before the code can be issued [13] [1].
NT stands for "no tax". GOV.UK's employer table describes it in four words, "No tax is deducted", and lists its usual use as "very specific cases" [18]. TaxAid calls it "rare and used only in exceptional circumstances" [16].
The code matters to payroll for three reasons. It switches off income tax entirely, so an NT applied to the wrong employee builds up a tax debt quickly. It does not switch off National Insurance, which many employees and some employers assume it does. And the commonest reason for NT, work carried out abroad, sits next to a statutory regime for internationally mobile employees that was rewritten from 6 April 2025 [12].
This guide sets out what NT means, the cases HMRC accepts, how the code is operated cumulatively and on a week 1 or month 1 basis, how it interacts with National Insurance and the new section 690 notifications, and what employers must check. Every worked figure was computed by a payroll engine implementing HMRC's routines for the 2026-27 tax year.
Key takeaways
- NT tells the employer to deduct no income tax from that employment; the employer acts on it only when HMRC issues it [13] [21].
- HMRC restricts NT to a closed list: statutory exemptions, double taxation agreements, ministers of religion, bankruptcy, certain professions, the entertainment industry and NI-only employments [1].
- National Insurance is unaffected: earnings under NT are paid "gross of tax but not of National Insurance contributions" [2].
- Operated cumulatively, NT refunds all tax deducted earlier in the year; on a week 1 or month 1 basis it gives no refund [13].
- There is no Scottish or Welsh version: the S and C prefixes do not apply to NT [13] [14].
- Section 690 directions have no effect from the 2025-26 tax year; employers now notify HMRC to run PAYE on part of a mobile employee's pay [12] [9].
What the NT tax code means
The PAYE Manual defines the code letter by letter: "The letter N means 'no tax'. The letter T is a suffix. The employer deducts no tax from the pay at this source" [13]. GOV.UK's employee-facing explanation is shorter still: "You're not paying any tax on this income" [17].
NT applies to one source of income only
An NT code covers the employment or pension that receives it, not the person. HMRC's P2 coding notice wording reads "Tax code NT shows no tax will be deducted on this income" [14]. An employee with NT on overseas earnings can still hold an ordinary code, with personal allowances, on UK income from another source [3].
That makes NT different from a high tax-free allowance. A code such as 1257L still taxes pay above the allowance; NT taxes nothing, however large the payment [17] [20].
NT compared with other special codes
NT is one of several codes that carry no number. The table sets out how each special code treats the same pay.
| Code | Effect on pay at this source | Typical use |
|---|---|---|
| NT | No income tax deducted | Closed list of exempt or non-UK cases |
| 0T | Taxed at all bands with no allowance | No information, or allowance used up |
| BR | All pay taxed at 20% | Second job or pension |
| D0 | All pay taxed at 40% | Second job above the basic rate band |
| K codes | Allowance negative, extra pay taxed | Benefits or debts exceed allowances |
Sources: PAYE Manual on codes for special cases [13] and GOV.UK's guide to code letters [17].
The guide to the tax code for a second job covers BR and D0 in detail. Unlike 0T or BR, which a payroll can apply from a starter checklist, NT never arises from employer defaults [13] [32].
When HMRC issues NT
The PAYE Manual page "cases where you should use code NT" is the controlling list for HMRC staff, and it states that NT "is used for all taxpayers regardless of where they live" [1]. Since April 2012 a reason must be recorded before the code can be issued [13].
The categories in HMRC's list
The manual groups the permitted cases into seven headings. The table summarises them with the condition attached to each.
| Category | Condition or limit |
|---|---|
| Statutory exemption | Income exempt from UK tax under legislation |
| Double taxation agreement | Country listed in HMRC's double taxation guidance; review if no reply after 12 weeks |
| Ministers of religion | Specific circumstances set out in HMRC guidance |
| Bankruptcy | From the date of bankruptcy to the following 5 April |
| Certain professions | Payments such as those to entertainers in defined situations |
| Entertainment industry | Engagements of 6 days or less under the seven-day rule |
| NI-only employments | Records showing NI deducted with nil taxable pay |
Source: PAYE Manual, cases where code NT should be used [1].
LITRG summarises the employee-facing reasons as non-residence, an arrangement to pay tax another way, and bankruptcy in the current tax year [10]. GOV.UK's employer table gives the example of "musicians who are regarded as self-employed and not subject to PAYE" [18].
Bankruptcy and treaty cases are time-limited
Several NT categories carry a built-in end date. For bankruptcy, HMRC uses NT from the date of bankruptcy only until the following 5 April [1]. LITRG advises that the code should go "back to a 'normal' code from 6 April" and warns that NT reused in later years means the employee is "likely to build up a tax debt" [10].
For double taxation agreement cases, HMRC staff who apply NT without supporting notes send a review form and diarise the case for 12 weeks; NT is removed if there is no reply or the reason has ended [1]. Visiting teachers and some visiting students receive NT only after a successful treaty relief claim, with any tax already deducted refunded by the employer [6].
Ministers of religion and the entertainment industry
Ministers of religion are taxed as employees in most cases, with their own rules on expenses and benefits [29]. NT is used for them only in the circumstances the PAYE Manual describes, not as a default for clergy [1].
For film and television, the manual's seven-day rule means that where someone is engaged for 6 days or less, income tax need not be deducted, but "National Insurance will be paid in the usual manner" and the FPS confirms those payments [1]. The employer still reports the engagement through RTI on or before payday [22].
NT for employees working abroad
The most common commercial use of NT is an employee sent to work overseas by a UK employer. HMRC's international employments section of the PAYE Manual sets out the process in a series of linked pages [27].
Departure from the UK
Where an employee is treated as not resident from the day after departure and keeps working for the UK employer outside the UK, code NT "may be issued" [5]. Residence itself is decided under the statutory residence test, not by the payroll [30].
HMRC writes to the employer confirming that NT applies to earnings for work done abroad from the date the employee was sent abroad until 6 April of the following year [4]. The employee is told to inform HMRC immediately when the overseas contract ends, and the record carries the overseas address and the start date of the NT period [3].
Two records in the year of departure
For the rest of the departure year the employer can either operate NT on the single record or run two separate PAYE records, one for UK earnings and one for overseas earnings. With two records, two separate FPS records are required for that year [2] [4].
Return to the UK
When the employee comes back, NT must be withdrawn and the emergency code is operated on a week 1 or month 1 basis until HMRC issues a new code [4]. The employer's duties page asks the employer to tell HMRC about the return so the code can be reviewed [15]. Employers managing many assignments through enterprise payroll usually track departure and return dates on the employee record so the code change lands on the right payday.
How payroll calculates pay under NT
NT is the simplest code to calculate for income tax and the easiest to misread for everything else. The PAYE tax table routines give no free pay and no tax for NT, but every other deduction runs as normal [23].
Cumulative or week 1 and month 1
The PAYE Manual states that NT can be issued on a cumulative or a week 1 or month 1 basis, and that the PAYE system defaults to week 1 or month 1 [13]. The instructions differ: on week 1 or month 1 the employer deducts no tax and makes no refunds; on the cumulative basis refunds are allowed [13] [24].
The difference is large in the month NT arrives. An employee on £3,000 a month has paid £2,342.00 of tax over six months on 1257L. If NT is applied cumulatively in month 7, the engine refunds the full £2,342.00 and net pay for the month is £5,185.84. On NT M1, month 7 shows £0.00 of tax, no refund, and net pay of £2,843.84 [2].
| Month 7 payslip, £3,000 gross | Income tax | Net pay |
|---|---|---|
| NT cumulative | £2,342.00 refunded | £5,185.84 |
| NT month 1 | £0.00 | £2,843.84 |
| 1257L (for comparison) | £390.20 | £2,453.64 |
Sources: PAYE Manual on code NT [13] and the effect of operating NT [2], with figures computed under the PAYE routines [23].
The cumulative tax code guide and the M1 tax code guide explain the two bases in general. The PAYE Manual also notes that HMRC cannot refund in the year of deduction in some departure cases, so tax not refunded by the employer is reviewed after 5 April [2] [25].
National Insurance is still due
NT is an income tax instruction only. The PAYE Manual confirms that overseas earnings under NT are paid "gross of tax but not of National Insurance contributions" [2], and the employer still applies the 2026-27 thresholds and rates for the employee's NI category letter [19] [34].
| Payslip under NT, category A | Income tax | Employee NI | Employer NI |
|---|---|---|---|
| £3,000 a month | £0.00 | £156.16 | £387.45 |
| £6,000 a month | £0.00 | £287.50 | £837.45 |
| £1,200 a week | £0.00 | £62.66 | £165.60 |
Sources: National Insurance rates and category letters [19] and the PAYE Manual on code NT [2].
Whether NI is due on overseas work is a separate question, governed by social security rules rather than the tax code, so a code change alone never stops NI deductions [11] [2]. For an employee over State Pension age on category C, NT and the NI letter combine: £3,000 a month is paid with no tax and no employee NI, while the employer still pays £387.45 [19].
No S or C prefix
Scottish and Welsh taxpayers normally carry an S or C prefix, but NT does not. The PAYE Manual states that the prefixes do not apply to NT, and the P2 notes confirm the code is unchanged for Scottish and Welsh taxpayers [13] [14]. A notice reading "SNT" or "CNT" should be queried with HMRC rather than keyed in.
NT and the section 690 regime
Before 6 April 2025, an employer whose employee worked partly outside the UK could apply for a section 690 direction, allowing PAYE to run on only the UK-work share of pay [8]. Finance Act 2025 substituted the legislation, and any direction under section 690 "has no effect in relation to tax year 2025-2026 or any subsequent tax year" [12].
The notification process
Under the new rules the employer notifies HMRC that it will operate PAYE on a proportion of an employee's income, using the form "previously known as a 'section 690'" [9] [28]. A notification is needed for each tax year the employee is eligible, and HMRC's employer duties page stresses that "the new notification process is only an estimate" [15].
| Feature | Section 690 direction (to 5 April 2025) | Notification (from 6 April 2025) |
|---|---|---|
| Who acts first | HMRC grants a direction | Employer notifies HMRC |
| Period covered | Up to three tax years | One tax year at a time |
| Effect on PAYE | PAYE on the UK-work percentage | PAYE on the estimated UK share |
| Self Assessment | Usually required | Required in all cases |
Sources: PAYE Manual on section 690 before 6 April 2025 [8], GOV.UK notification guidance [9] and the globally mobile employee direction page [7].
The guidance was updated from 6 April 2026 so that, for qualifying new residents, the estimate of non-PAYE income is "limited to 30%" [9]. The employee must complete a Self Assessment return even if HMRC later issues a direction [7].
Where NT still fits
The notification regime handles employees who work both in and outside the UK. NT remains the code for earnings that are wholly outside the scope of UK tax at that source, such as overseas earnings after a non-resident departure [5]. Without either NT or a notification, an employer "must operate PAYE on all payments" to a mobile employee for work done both in and outside the UK [15].
What employers must check when NT appears
NT is the one code where an error costs the employee in a single direction: tax not deducted during the year becomes a liability later. Three controls cover most of the risk.
Act only on an HMRC notice
The employer applies NT only when HMRC sends it on a P6 or P9 notice, or in the narrow industry arrangements HMRC has agreed [21] [1]. Notices arrive through PAYE Online or the software's data service [26]. An employee's own statement that they are non-resident or exempt is not enough.
Watch the end dates
Bankruptcy NT ends on 5 April, overseas NT is set for the departure year and reviewed at annual coding, and treaty cases are reviewed after 12 weeks without a reply [1] [3]. Bureaux running a multi-client payroll dashboard can flag every NT record in a single view ahead of the April code uplift [21].
Report the basis correctly
Each FPS records the code and whether it was operated on a non-cumulative basis, and the manual explains that an FPS with nil taxable pay to date and nil tax but an NI deduction is treated as an "NI Only" record [1] [33]. Platforms that run payroll through the HMRC-recognised payroll API pass NT and its basis as fields on each calculation, as listed in the API documentation, and receive NI and net pay computed under the same routines as any recognised product [23].
Check an NT code before the next payrun
Before entering an NT code from a notice, an employer can confirm what it means, including any W1 or M1 marker, with the Moonworkers tax code checker, which decodes standard, flat-rate, K, NT and emergency codes.
On your payslip, P45 or P60. Suffixes W1, M1 or X welcome.
What you'll get
Enter any UK tax code to see:
- · what each letter and number means
- · which nation's rates apply (S and C prefixes)
- · cumulative vs emergency W1/M1/X basis
- · the exact tax-free pay for every pay schedule, to the penny
Try 1257L, a K code, or an emergency W1 code.
Payroll that applies every tax code correctly
Moonworkers runs the full HMRC exact percentage method on every payslip, including K codes, emergency codes and in-year code changes, and files RTI automatically.
Conclusion
NT is a narrow instruction with wide consequences. It removes income tax at one source, for one of a short list of reasons HMRC controls, and leaves National Insurance, reporting and every other payroll duty in place. The cases that justify it, from bankruptcy to overseas assignments, almost all carry an end date, which is why the code is safest treated as temporary and reviewed on every new notice.
The surrounding framework is moving. With section 690 directions replaced by employer notifications, more of the work of deciding how much pay falls inside UK PAYE now starts with the employer's own estimate. As international mobility grows and payroll is embedded in HR and global employment platforms, the accuracy of NT and its neighbouring rules depends on systems that keep departure dates, notices and code bases in step from one payday to the next.
Frequently asked questions
Does the NT tax code mean no National Insurance either?
No. NT stops income tax only. HMRC's manual says earnings under NT are paid "gross of tax but not of National Insurance contributions" [2]. Employee and employer NI are calculated as normal for the employee's category letter [19].
Why would HMRC give someone an NT tax code?
HMRC uses NT only for the cases in its PAYE Manual list, including statutory exemptions, double taxation agreements, bankruptcy and some entertainment and overseas work [1]. A reason must be recorded before the code is issued [13]. It is not a code an employer can choose for itself.
Can an employer use NT for an employee who says they are non-resident?
Not without an HMRC notice. Residence is decided under the statutory residence test [30], and HMRC issues NT to the employer once it accepts the case [4]. Until then the employer operates the code it already holds.
How long does an NT tax code last?
It depends on the reason. Bankruptcy NT runs only to the following 5 April, and overseas NT covers the departure year and is reviewed at annual coding [1] [3]. LITRG warns that an NT code carried into later years without a valid reason can build up a tax debt [10].
