500T Tax Code  – Everything You Need to Know

The 500T tax code is a temporary UK PAYE tax code used by HMRC when there is not enough information to assign an employee’s correct permanent tax code.

It usually gives a reduced £5,000 Personal Allowance and is commonly applied when someone starts a new job, has multiple income sources, or experiences changes in their tax records.

Because the code often works on a non cumulative basis, it can result in higher or inconsistent tax deductions until HMRC updates the employee’s details.

Key Takeaways:

• The 500T tax code is temporary
• It provides a £5,000 tax free allowance
• HMRC uses it when tax records are incomplete
• It may increase PAYE deductions
• Multiple jobs or pensions can trigger the code
• Employees may receive refunds after corrections
• Updating HMRC details can help fix the code quickly

What Does the 500T Tax Code Mean?

The 500T tax code contains two separate elements that help HMRC calculate how much tax should be deducted from an employee’s salary.

Breaking Down the “500” Element

The number 500 refers to the amount of tax free Personal Allowance assigned to the employee. In this case, the allowance is £5,000 for the tax year.

This is significantly lower than the standard Personal Allowance usually provided under the 1257L tax code.

A lower Personal Allowance means that more of the employee’s income becomes taxable. As a result, monthly PAYE deductions may increase even when salary levels remain the same.

Employees often become concerned when they notice reduced take home pay after moving onto the 500T tax code.

In many situations, the code is only temporary while HMRC updates payroll records and confirms the correct tax position.

What the “T” Suffix Represents?

The “T” suffix tells employers and payroll systems that HMRC needs additional calculations before assigning a permanent tax code. The suffix is commonly used when a person’s tax affairs are more complicated than standard PAYE arrangements.

The “T” can appear when:

• HMRC records are incomplete
• Multiple income sources exist
• Taxable benefits require adjustments
• Previous tax underpayments need reviewing

Unlike standard tax codes that apply fixed allowances, the 500T code allows HMRC to make temporary adjustments until accurate information becomes available.

Why HMRC Uses Temporary Tax Codes?

Temporary tax codes are used to prevent major tax errors while HMRC reviews employment and income details.

The PAYE system depends on accurate payroll reporting from employers. If records do not match correctly, HMRC may issue a temporary code until the situation is clarified.

A payroll adviser explained the issue clearly:

“Employees often panic when they see a temporary tax code because they assume payroll has made a mistake. In reality, HMRC usually applies the code while waiting for updated information from an employer or pension provider.”

The temporary code may remain active for a short period or for several months depending on how quickly the required information is processed.

Tax Code Element	Meaning	Effect on Employee
500	£5,000 tax free allowance	Lower allowance than standard PAYE code
T	Additional HMRC calculations required	Temporary tax treatment
Non cumulative basis	Each pay period treated separately	Tax may vary month to month

Why Have Employees Been Given a 500T Tax Code?

There are several reasons why HMRC may assign the 500T tax code to UK employees. In most cases, it happens because payroll information is incomplete or because HMRC is reviewing changes in a person’s financial circumstances.

One of the most common situations occurs when an employee starts a new job without providing a P45 from their previous employer.

The P45 contains important information about earnings and tax already paid during the current tax year. Without it, the employer may not have enough details to apply the correct tax code immediately.

Employees may also receive the 500T tax code when they:

• Have more than one job
• Receive pension income alongside employment income
• Return to work after a long break
• Change payroll providers
• Experience delays in HMRC record updates

When multiple income sources exist, HMRC must decide how the Personal Allowance should be allocated across different employments or pensions. During this review period, temporary tax codes are often used.

A finance manager described the confusion many employees experience:

“We regularly speak to workers who think their salary has been reduced because their tax deductions suddenly increase. In most situations, the issue is simply temporary PAYE coding while HMRC updates employment records.”

Some employees may remain on the 500T tax code for several months if records are delayed or if employers submit incomplete payroll information.

Common Reason	Why HMRC Uses 500T
Missing P45	Previous earnings cannot be verified
Multiple jobs	Allowance allocation requires review
Pension income	Additional PAYE adjustments needed
Payroll changes	Employer records updating
Incomplete tax records	Temporary coding required

Is the 500T Tax Code an Emergency Tax Code?

The 500T tax code is often associated with emergency tax, although it is not exactly the same as traditional emergency tax codes.

Similarities Between 500T and Emergency Tax Codes

Both emergency tax codes and the 500T code are temporary measures used when HMRC lacks complete information.

Their purpose is to ensure income tax continues being collected until the correct tax position is confirmed.

Employees on these codes may notice:

• Higher PAYE deductions
• Changes in take home pay
• Temporary overpayment of tax
• Fluctuating monthly tax calculations

The situation commonly arises after starting a new job or when employment records have not transferred correctly between employers.

Key Differences UK Employees Should Know

Traditional emergency tax codes often include:

• 1257L W1
• 1257L M1
• OT tax code

The 500T code differs because HMRC has already assigned a reduced Personal Allowance and identified that additional calculations are needed.

The code is also commonly applied on a non cumulative basis. This means each pay period is treated independently instead of balancing tax gradually throughout the year.

Tax Code	Main Purpose	Typical Situation
1257L W1	Emergency tax basis	New employment
OT	No allowance applied	Missing tax details
500T	Temporary reviewed allowance	Complex PAYE circumstances

How Does a Non Cumulative 500T Tax Code Work?

One of the most important features of the 500T tax code is that it often operates on a non cumulative basis.

Under a cumulative tax code, HMRC looks at total earnings and tax paid across the entire tax year.

PAYE deductions gradually balance themselves over time. If too much tax is deducted one month, future months may automatically correct the difference.

With a non cumulative code, this balancing process does not happen automatically.

How Each Pay Period Is Treated Separately?

Under the 500T non cumulative basis, each pay period is calculated independently. Payroll systems ignore:

• Previous earnings
• Earlier tax deductions
• Prior PAYE adjustments

For example, if an employee earns overtime during one month, the increased earnings may trigger higher tax deductions immediately. The following month’s calculations will not automatically compensate for the earlier deduction.

This can create inconsistent take home pay even when salary levels remain fairly stable.

Why Previous Earnings Are Ignored?

HMRC uses the non cumulative approach when complete annual earnings information is unavailable. The method helps prevent large underpayments while payroll records are still being reviewed.

The temporary calculation remains in place until:

• Previous employment details are confirmed
• PAYE submissions are updated
• HMRC finalises the correct tax code

An accountant explained the issue this way:

“Employees often think payroll has calculated their tax incorrectly because deductions vary every month. In reality, the non cumulative system recalculates tax from scratch each pay period until HMRC confirms the final coding.”

Impact on Monthly Salary Deductions

The non cumulative basis can affect monthly salary deductions in several ways. Employees may notice:

• Irregular PAYE deductions
• Reduced net pay
• Larger tax deductions during overtime periods

The effect depends on income level, payroll timing, and whether additional income sources exist.

Could the 500T Tax Code Cause Overpayment or Underpayment of Tax?

The 500T tax code can lead to either overpayment or underpayment depending on the employee’s overall circumstances.

Paying Too Much Tax

Overpayment is one of the most common outcomes because the code only provides a £5,000 Personal Allowance instead of the full standard allowance available to most UK employees.

This means:

• More earnings become taxable
• PAYE deductions increase
• Take home pay may reduce temporarily

Employees who recently changed jobs are particularly likely to overpay tax while HMRC updates records.

Paying Too Little Tax

In some situations, the temporary code may also result in underpayment. This can happen if:

• Multiple jobs are not correctly linked
• Pension income has not been fully reported
• Taxable benefits are still being reviewed

If too little tax is collected during the year, HMRC may later issue:

• Revised tax codes
• PAYE adjustments
• Tax demands for unpaid amounts

Effects on Take Home Pay

Tax code changes directly affect monthly income. Employees often notice the impact immediately after receiving a new payslip.

The difference may become more noticeable when:

• Bonuses are paid
• Overtime increases
• Additional work is taken on
• Pension income starts

Tax Refunds and Tax Bills

Once HMRC reviews the employee’s records fully, corrections are usually made automatically through the PAYE system.

Possible outcomes include:

• Tax refunds through payroll
• Revised tax codes
• Future PAYE adjustments
• Underpayment recovery

Employees should review HMRC notifications carefully to ensure any corrections appear accurate.

How Can Employees Check If Their 500T Tax Code Is Correct?

Checking a tax code regularly is one of the best ways to avoid long term payroll issues.

Employees can confirm their current tax code by reviewing:

• Payslips
• HMRC online accounts
• Annual PAYE summaries
• Employer payroll notifications

The GOV.UK Income Tax service allows employees to:

• View current tax codes
• Check estimated annual income
• Update employment details
• Review tax history

Employees should pay particular attention after changing jobs or starting additional work.

A payroll consultant shared a common example:

“One employee ignored their temporary tax code for almost a year because they assumed payroll would fix everything automatically. Once HMRC reviewed the records, they discovered they had overpaid several hundred pounds.”

Monitoring payslips regularly can help employees identify coding issues much earlier.

How Can Someone Change or Fix a 500T Tax Code?

Correcting the 500T tax code usually involves updating HMRC with accurate employment information.

Submitting a P45 or Starter Checklist

Employees beginning a new role should provide a P45 whenever possible. This document allows payroll systems to transfer:

• Previous earnings
• Tax paid during the current year
• Existing PAYE information

If a P45 is unavailable, the employee should complete a Starter Checklist so the employer can submit temporary payroll details correctly.

Updating Details with HMRC

Employees can also contact HMRC directly to:

• Confirm employment information
• Report multiple income sources
• Correct payroll inaccuracies
• Update pension details

Most updates can now be completed online through GOV.UK.

How Long HMRC Takes to Update a Tax Code?

Some coding changes happen quickly, while more complex reviews can take several weeks.

Processing times depend on:

• Employer reporting speed
• PAYE record accuracy
• Multiple employment arrangements
• Pension adjustments

Once HMRC issues a revised code, employers receive electronic instructions through payroll systems.

Method	Purpose
P45 submission	Transfers previous PAYE details
Starter Checklist	Creates temporary payroll records
HMRC online update	Corrects tax information
Payroll review	Verifies employer submissions

What Happens If the 500T Tax Code Is Left Unchanged?

Leaving a temporary tax code unresolved for a long period can create ongoing financial complications.

Employees who remain on the 500T code may continue paying incorrect amounts of tax throughout the year. In some cases, this leads to substantial overpayments that are only corrected after HMRC completes an annual PAYE review.

Long term issues may include:

• Incorrect monthly tax deductions
• Delayed tax refunds
• Unexpected underpayment bills
• Difficulty budgeting take home pay

Incorrect tax records can also affect:

• Mortgage applications
• Loan affordability checks
• Pension contribution calculations

Employers generally cannot remove temporary tax codes without official HMRC instructions, which is why employees should contact HMRC directly if the code remains unchanged for an extended period.

How Does the 500T Tax Code Affect Employees With Multiple Jobs or Pensions?

Employees with more than one source of income are more likely to receive temporary tax codes because HMRC must decide how allowances should be distributed.

This commonly affects:

• Workers with second jobs
• Employees receiving pensions
• Part time workers with multiple employers

When multiple PAYE systems operate at the same time, HMRC may temporarily allocate allowances incorrectly until records are fully updated.

Common issues include:

• Duplicate Personal Allowances
• Missing allowances
• Incorrect secondary income taxation

Employees receiving pension income should monitor tax deductions carefully because pension providers and employers report income separately to HMRC.

Can Employees Claim a Refund From the 500T Tax Code?

Employees who overpay tax due to the 500T code may receive a refund once HMRC completes its calculations.

When Refunds Happen?

Refunds usually occur after:

• HMRC issues a corrected tax code
• PAYE records are reconciled
• Employment details are verified

Some refunds appear automatically through payroll adjustments.

How to Claim Through HMRC?

If automatic adjustments do not occur, employees can contact HMRC directly through:

• GOV.UK online services
• Telephone support
• Self Assessment tax returns

Automatic PAYE Reconciliations

HMRC regularly reviews PAYE records after the end of each tax year to identify:

• Overpayments
• Underpayments
• Incorrect allowances

These reviews often trigger automatic corrections.

Timeframes for Repayments

Refund processing times vary depending on the complexity of the employee’s tax situation.

Repayments may be issued through:

• Salary adjustments
• Direct bank transfers
• Cheques

What Are the Most Common UK Tax Codes Compared With 500T?

Understanding common UK tax codes helps employees recognise whether their PAYE situation appears normal.

Tax Code	Meaning	Common Use
1257L	Standard Personal Allowance	Main employment
BR	Basic rate tax on all income	Second jobs
OT	No Personal Allowance	Missing tax information
500T	Temporary reduced allowance	Incomplete HMRC records
D0	Higher rate tax on all earnings	Additional income
K Code	Tax owed from previous years	PAYE recovery adjustments

Different tax codes reflect different financial situations, which is why employees should always review coding changes carefully and ensure HMRC records remain accurate.

Conclusion

The 500T tax code is usually a temporary measure used by HMRC when additional information is needed to calculate the correct amount of income tax.

Although it can lead to higher or inconsistent PAYE deductions, the issue is often resolved once employment or pension records are updated.

UK employees should regularly check payslips, monitor HMRC notifications, and provide accurate payroll information to avoid overpaying or underpaying tax.

Taking quick action can help prevent long term tax complications and ensure the correct tax code is applied.

FAQs About the 500T Tax Code

Can the 500T tax code apply to pension income?

Yes, HMRC may apply the 500T tax code to pension income when tax records are incomplete or multiple income sources exist.

Does the 500T tax code automatically change?

In many cases, HMRC automatically updates the code once correct employment or pension information is received.

How can someone know if they are paying emergency tax?

Employees can check their payslip for temporary tax codes such as 500T, OT, or codes marked with W1 or M1.

Will HMRC refund overpaid tax automatically?

HMRC often processes refunds automatically through PAYE adjustments or after the tax year reconciliation process.

Can employers change a 500T tax code themselves?

No, employers cannot independently change tax codes unless instructed by HMRC through official PAYE notices.

Is the 500T tax code used permanently?

No, the 500T tax code is generally temporary until HMRC receives accurate taxpayer information.

What documents are needed to correct a temporary tax code?

Employees usually need a P45, Starter Checklist, National Insurance details, and updated employment information.