What Is the 500T Tax Code? What it Means on Your Payslip

What Does the 500T Tax Code Actually Mean?

The 500T tax code is constructed from two components that work together to determine your tax treatment. Let’s break down each element to understand precisely what this code tells your employer.

The Number Component: 500

The number ‘500’ in your tax code represents the amount of tax-free income you’re entitled to in the tax year before income tax applies.

However, there’s an important calculation to understand here. Tax codes work by multiplying the number by 10 to give your actual tax-free allowance. Therefore, 500 multiplied by 10 equals £5,000 in tax-free income for the entire tax year.

This £5,000 allowance is substantially lower than the standard Personal Allowance of £12,570 for the 2024/25 tax year. In practical terms, this means you’ll pay income tax on a much larger portion of your earnings than someone with the standard tax code.

The Letter Component: T

The ‘T’ suffix in your tax code carries specific meaning within HMRC’s coding system. What does T on a tax code mean? The ‘T’ indicates that your tax code includes other calculations to work out your Personal Allowance, and that HMRC needs to review these calculations. It’s used when your circumstances are more complex than average or when additional information is required.

The ‘T’ suffix also signifies that this is a non-cumulative tax code. This is crucial to understand because it fundamentally changes how your tax is calculated compared to cumulative codes.

Non-Cumulative Tax Calculation

With a non-cumulative code like 500T, your employer treats each pay period in isolation. They won’t consider how much tax you’ve already paid earlier in the tax year when calculating your current deduction.

This contrasts sharply with cumulative tax codes, which spread your personal allowance across the entire year and adjust for any overpayments or underpayments in previous months.

In practice, this non-cumulative approach often results in you paying more tax than you should in the short term. Your employer simply looks at your current pay period, applies the £500 monthly allowance (if you’re paid monthly), and taxes the remainder without any adjustments.

Why Have You Been Assigned the 500T Tax Code?

Several circumstances can trigger HMRC to assign you the 500T tax code. Understanding which situation applies to you is the first step toward resolving it.

Starting a New Job Without a P45

When you begin new employment, your employer needs information about your tax position. Ideally, you’d provide a P45 form from your previous employer, which shows your tax code and how much you’ve earned and been taxed in the current tax year.

If you don’t have a P45 because this is your first job, you were previously self-employed, or you’ve simply misplaced it, your employer will ask you to complete a starter checklist.

Depending on how you answer the questions on this form and the information available to HMRC, you might be assigned the 500T code temporarily whilst your records are updated.

Returning to Employment After a Break

Perhaps you’ve taken time away from work, whether for personal reasons, to care for family members, to travel, or due to redundancy.

When you return to employment after an extended period, HMRC might not have current information about your circumstances. In these situations, the 500T code serves as a placeholder until your tax position is clarified.

HMRC Lacks Current Information

Sometimes HMRC simply doesn’t have sufficient or up-to-date information about your circumstances to assign the correct tax code. This might occur if you’ve had multiple jobs, complex employment patterns, or if there have been administrative delays in updating your records.

The 500T code ensures you’re paying some tax whilst your situation is being sorted out, even if it means you initially pay more than necessary.

Changes in Employment Status

If you’ve transitioned from self-employment to PAYE employment, moved from receiving benefits to working, or made other significant changes to your employment status, HMRC might assign a temporary code like 500T until they receive and process all the relevant information about your new circumstances.

Is 500T an Emergency Tax Code?

Is 500T an emergency tax? Yes, the 500T code functions as an emergency tax code, though it’s technically classified as a temporary non-cumulative code.

Emergency tax codes are assigned when your employer or pension provider doesn’t have enough information to operate the correct code, ensuring that you still pay tax whilst your proper code is being determined.

Emergency tax codes share certain characteristics: they’re temporary, often result in higher tax deductions, and require action from either you or HMRC to correct.

The 500T code fits this profile perfectly. However, it’s worth noting that 500T is less common than other emergency codes like 1257L W1, 1257L M1, or the 0T code.

The emergency nature of the 500T code means it’s designed to be a short-term solution. HMRC expects either you or your employer to provide the necessary information to update your code to the correct one within a few weeks or months at most. If the code persists beyond a few months, it’s a clear sign that action is needed to rectify your tax position.

How the 500T Tax Code Affects Your Take-Home Pay

Understanding the financial impact of the 500T code is essential for managing your budget whilst this temporary situation persists.

Calculating Tax Under 500T

Let’s work through a practical example to illustrate how the 500T code affects your pay. Suppose you earn £2,500 per month (£30,000 annually) and you’re paid monthly.

With the 500T code, your tax-free allowance for the month is £500 (£5,000 ÷ 12 months). This means your taxable income for the month is £2,000 (£2,500 – £500).

Using the current income tax rates for England, Wales, and Northern Ireland:

• You’d pay 20% tax on your entire £2,000 taxable income
• Monthly tax deduction: £400
• National Insurance would also apply separately

Comparison with the Standard Tax Code

Now let’s compare this with what you’d pay under the standard 1257L tax code for 2024/25.

With 1257L, your monthly tax-free allowance would be £1,047.50 (£12,570 ÷ 12 months). Using the same £2,500 monthly salary:

• Taxable income: £1,452.50 (£2,500 – £1,047.50)
• Monthly tax: approximately £290.50

The difference is stark: under 500T you’d pay approximately £109.50 more in tax each month compared to the standard code. Over several months, this overpayment can accumulate to a substantial sum.

Impact on Weekly and Annual Earnings

If you’re paid weekly, your tax-free allowance under 500T would be roughly £96.15 per week (£5,000 ÷ 52 weeks), compared to £241.73 under the standard 1257L code. The weekly overpayment would be proportionally similar to the monthly example.

Annually, if the 500T code remained in place for an entire tax year (which shouldn’t happen, but helps illustrate the point), you’d pay tax on £25,000 of your £30,000 income rather than just £17,430, resulting in approximately £1,314 in excess tax deductions.

Understanding Related Tax Codes: 0T and Other Emergency Codes

To fully grasp the 500T code, it’s helpful to understand how it relates to other emergency and temporary tax codes you might encounter.

What Does the 0T Tax Code Mean?

The 0T code is another common emergency tax code, and many people wonder about the connection between 0T and 500T. The 0T code indicates that you have no tax-free personal allowance at all—the entire amount you earn is subject to income tax from the first pound.

How do I get out of the 0T tax code? The process is similar to addressing a 500T code: you need to provide HMRC with the correct information about your circumstances, typically by contacting them directly or ensuring your employer has submitted the proper details.

The 0T code might be assigned if you’ve used up your entire Personal Allowance elsewhere (perhaps through a second job or pension), if you owe tax from previous years, or if HMRC needs to collect tax through your wages for other reasons.

Other Emergency Tax Code Variations

Several other emergency codes exist within the PAYE system:

1257L W1 or M1: These codes use the standard Personal Allowance but operate on a non-cumulative basis (W1 for weekly pay, M1 for monthly). They’re the most common emergency codes and generally less severe than 500T or 0T.

BR (Basic Rate): This code taxes all your income at the basic rate of 20% with no personal allowance. It’s typically used for second jobs or pensions.

D0 (Higher Rate): All income is taxed at the higher rate of 40%, usually applied when someone has multiple income sources and has already used their basic rate band elsewhere.

How to Check If You’re on the 500T Tax Code

Identifying your tax code is the first step toward resolving any issues. Here’s where to look.

Checking Your Payslip

Your tax code appears prominently on your payslip, typically near your National Insurance number and gross pay information. Most employers provide detailed payslips either physically or through online payroll systems. Look for a field labelled ‘Tax Code’ or similar, if you see ‘500T’, you’ve confirmed you’re on this code.

Make sure to check your most recent payslip, as tax codes can change from one pay period to the next if HMRC has updated your records.

Reviewing Your HMRC Personal Tax Account

Your HMRC Personal Tax Account provides comprehensive information about your tax situation, including your current tax code. To access it:

1. Visit the HMRC website and sign in or create an account using Government Gateway credentials
2. Navigate to the ‘Pay As You Earn (PAYE)’ section
3. View your tax code and the income it applies to

Your Personal Tax Account also shows a history of your tax codes and explains how HMRC has calculated your current code. This can provide valuable insights into why you’ve been assigned the 500T code.

Understanding Tax Code Notices

HMRC sends tax code notifications when they change your code. These notices, sometimes called ‘Coding Notices’ or ‘P2’ forms, explain your new code and how it’s been calculated.

If you’ve recently received correspondence from HMRC showing the 500T code, review it carefully as it may explain the specific reasons for this assignment.

How to Correct Your 500T Tax Code Step-by-Step

Taking action to correct an incorrect tax code is essential to avoid continued overpayment of tax. Here’s exactly what you need to do.

Step 1: Gather Your Information

Before contacting HMRC, collect the following details:

• Your National Insurance number
• Your employer’s PAYE reference (found on your payslip)
• Your P45 from your previous employer, if applicable
• Details of any other income or employment
• Recent payslips showing the 500T code

Having this information readily available will make the process smoother and quicker.

Step 2: Contact HMRC

The most direct route to correcting your tax code is contacting HMRC’s Income Tax helpline on 0300 200 3300. Lines are generally open Monday to Friday, 8am to 6pm. Be prepared for potential waiting times during busy periods.

When speaking with an HMRC advisor:

• Explain that you’ve been assigned the 500T tax code
• Provide your personal details and National Insurance number
• Describe your employment situation clearly
• Answer any questions about your income and circumstances

HMRC can often update your tax code during the call or shortly afterwards once they’ve verified your information.

Step 3: Use Your Personal Tax Account

Alternatively, you can update some information through your HMRC Personal Tax Account. While you can’t directly change your tax code, you can:

• Update your employment information
• Notify HMRC of changes in your circumstances
• Check that HMRC has the correct details about your employer

Once you’ve updated your information online, HMRC will review it and issue a new tax code if appropriate, usually within a few days.

Step 4: Inform Your Employer

Ensure your employer has the correct information about you. If you’ve recently started and haven’t provided a P45, complete the starter checklist accurately. Your employer will send this information to HMRC, who will then assign the appropriate tax code.

If your employer has made an error in the information they’ve submitted to HMRC, ask them to correct it. Your payroll or HR department should be able to help with this.

Step 5: Wait for Confirmation

After taking action, HMRC will send you a tax code notification explaining your new code. Your employer will also receive notification and should apply the new code to your pay from the date specified. This usually happens within 2-4 weeks but can occasionally take longer.

Check your next payslip carefully to confirm that the updated code has been applied correctly.

How to Claim Back Tax Overpaid Under the 500T Code

If you’ve been on the 500T code for several pay periods, you’ve likely overpaid tax. Here’s how to reclaim what you’re owed.

Automatic Adjustments Through Updated Tax Codes

If your tax code is corrected to a cumulative code during the tax year, your employer will automatically adjust your tax over your remaining pay periods.

The PAYE system is designed to balance out overpayments and underpayments across the tax year, so you should see reduced tax deductions going forward until the overpayment is recovered.

This automatic adjustment is the simplest option and requires no action from you beyond getting your tax code corrected.

End of Year Tax Refunds

If your tax code isn’t corrected until after the tax year ends (on 5 April), or if the automatic adjustment doesn’t fully recover your overpayment, HMRC will review your position after the tax year closes. How to get 0T tax back? The same process applies to 500T overpayments.

HMRC automatically issues refunds for overpaid tax once they’ve received all the necessary information from your employer(s) about your earnings for the year.

This typically happens a few months after the tax year ends. The refund will be sent either by cheque or directly into your bank account, depending on the information HMRC holds.

Making a Manual Claim

If you believe you’ve overpaid tax and haven’t received an automatic refund, you can make a manual claim. You’ll need to:

1. Wait until after the tax year has ended
2. Gather all your P60 forms and payslips from the tax year
3. Calculate your total income and tax paid
4. Complete and submit a P50 form if you’ve stopped working, or a P53 form if you’re claiming after leaving employment but continued working

Alternatively, contact HMRC directly on 0300 200 3300 to discuss your situation. They can check your records and process a refund if you’re due one.

Tracking Your Claim

Once you’ve submitted a claim, you can track its progress through your Personal Tax Account or by contacting HMRC. Refunds are typically processed within a few weeks, though complex cases may take longer.

Common Scenarios Where 500T Tax Code Appears

Understanding specific situations where the 500T code commonly appears can help you anticipate and address potential issues.

Multiple Jobs and the 500T Code

If you have more than one job simultaneously, tax codes become more complex. Your Personal Allowance applies across all your employment income combined, not separately to each job.

Typically, your main job receives a code that includes your Personal Allowance (like 1257L), whilst your second job receives a code like BR (Basic Rate) or 0T.

However, during transitions between jobs or when HMRC lacks current information about multiple employments, you might temporarily receive a 500T code on one or more of your employments. This often happens when you start a second job before HMRC has updated their records.

Students and Part-Time Workers

Students and part-time workers are particularly susceptible to being placed on emergency codes like 500T, especially if they work seasonal or temporary jobs.

When taking summer employment or short-term positions, you might not have a P45, or there might be gaps in your employment that confuse the system.

If you’re a student working part-time and earn less than the standard Personal Allowance annually, being on the 500T code means you’re definitely overpaying tax and should prioritise getting it corrected.

Transitioning from Self-Employment

Moving from self-employment to PAYE employment presents unique challenges. As a self-employed individual, you wouldn’t have been in the PAYE system, so when you start employed work, HMRC might assign an emergency code until they’ve properly integrated you into PAYE.

Ensure you inform HMRC that you’re transitioning from self-employment and provide your new employer’s details promptly to minimise time spent on an emergency code.

Pension Recipients Returning to Work

If you’re receiving a pension and decide to return to work, coordinating tax codes between your pension provider and new employer can be complicated.

Your Personal Allowance might be split between the two income sources, or HMRC might need time to calculate the appropriate arrangement.

During this adjustment period, you could be assigned a 500T code on either your pension or your employment income. Contact HMRC to explain your situation so they can assign the correct codes to each income source.

Preventing Future Tax Code Issues

Once you’ve resolved your 500T code situation, take steps to prevent similar issues in the future.

Keep HMRC Updated

Whenever your circumstances change, inform HMRC promptly. This includes:

• Starting or leaving employment
• Taking on additional jobs
• Changes in benefits or pensions
• Changes of address
• Marriage or civil partnership that affects your tax

You can update most information through your Personal Tax Account quickly and easily.

Always Provide a P45 to New Employers

When starting new employment, provide your P45 to your new employer as soon as possible. Your P45 contains vital information that ensures you’re placed on the correct tax code from the outset. If you’ve lost your P45, inform your new employer immediately so they can complete the proper starter procedures.

Regularly Review Your Tax Code

Make it a habit to check your tax code at least:

• When you receive each payslip
• At the start of each new tax year (April)
• Whenever your circumstances change
• When you receive correspondence from HMRC

This vigilance helps you catch incorrect codes early, minimising overpayment and administrative hassle.

Understand Your Tax Code Letters

Familiarise yourself with what different tax code letters mean. This knowledge empowers you to spot when something doesn’t look right with your tax code. The most common codes are:

• L: You’re entitled to the standard Personal Allowance
• M: You’ve received a Marriage Allowance transfer from your partner
• N: You’ve transferred some Personal Allowance to your partner
• T: Your code includes other calculations
• 0T: Your Personal Allowance has been used up or HMRC needs more information
• BR: All income is taxed at basic rate
• K: You have income that isn’t being taxed another way and it’s worth more than your Personal Allowance

Understanding Tax Codes for Scotland and Wales

It’s important to note that tax codes can differ if you’re a Scottish or Welsh taxpayer due to devolved income tax powers.

Scottish Tax Codes

Scottish taxpayers have an ‘S’ prefix before their code number (e.g., S1257L). Scotland has different income tax rates and bands compared to the rest of the UK. If you’re a Scottish taxpayer and receive a 500T code, it might appear as S500T, though the principles remain the same.

Welsh Tax Codes

Welsh taxpayers have a ‘C’ prefix (C for Cymru) before their code number (e.g., C1257L). Wales has its own Welsh rates of income tax, though currently, these match the rates in England and Northern Ireland. A Welsh taxpayer on an emergency code would see C500T.

How Residency Is Determined

Your tax code prefix depends on where you live, not where you work. HMRC determines this based on your main home address. If you move between countries within the UK, inform HMRC so they can update your tax code accordingly.

The Broader Context: Understanding PAYE and Tax Codes

To fully appreciate the 500T code situation, it helps to understand the wider PAYE system.

How PAYE Works

Pay As You Earn (PAYE) is the system HMRC uses to collect Income Tax and National Insurance from employment income. Your employer deducts these taxes from your wages before paying you, then sends the money directly to HMRC on your behalf.

PAYE operates on the principle of spreading your tax liability across the tax year through regular deductions from each pay period.

This system is designed to ensure most people pay exactly the right amount of tax across the year without needing to complete a Self Assessment tax return.

The Role of Tax Codes in PAYE

Tax codes are the instruction set that tells your employer how much tax-free income you’re entitled to in the tax year. They ensure that tax deductions align with your Personal Allowance and any other tax adjustments relevant to your circumstances.

HMRC sends your tax code to your employer, who then applies it when calculating your pay. The code determines not just your tax-free allowance but also whether the calculation should be cumulative (accounting for the entire tax year to date) or non-cumulative (treating each pay period in isolation).

Why Tax Codes Change

Your tax code isn’t permanent—it can and should change when your circumstances do. HMRC regularly reviews and updates tax codes based on:

• Changes in the standard Personal Allowance (announced in the Budget each year)
• Information about benefits you receive from your employer
• Updates you or your employer provide about your circumstances
• Corrections to previous errors
• Other income you receive (pensions, savings interest, etc.)

Understanding that tax codes are dynamic helps explain why temporary codes like 500T are sometimes necessary whilst HMRC processes updated information.

Frequently Asked Questions About the 500T Tax Code

 

Q: How long will I be on the 500T tax code?

The 500T code should be temporary, typically lasting only until HMRC receives sufficient information about your circumstances to assign the correct code.

This usually happens within 2-4 weeks if you take prompt action to provide the necessary details. However, if you don’t contact HMRC or provide your employer with correct information, the code could persist for months.

Q: Will I automatically receive a refund if I’ve overpaid tax on the 500T code?

If your code is corrected during the tax year and it’s cumulative, your employer will automatically adjust your tax deductions to recover the overpayment. If the code is corrected after the tax year ends, HMRC will review your records once they receive your end-of-year information and issue a refund if you’re due one. This process is usually automatic but can take several months after the tax year ends.

Q: Can I continue working on the 500T code, or do I need to stop working until it’s corrected?

You can absolutely continue working whilst on the 500T code. The code doesn’t prevent you from being paid, it simply means you’ll pay more tax than necessary in the short term. Focus on getting the code corrected whilst continuing to work, and you’ll recover any overpayment either through adjusted deductions or a refund.

Q: Is the 500T code the same as being on emergency tax?

Yes, essentially. The 500T code is a type of emergency or temporary tax code. It’s assigned when HMRC doesn’t have complete information about your tax situation. Like other emergency codes, it’s designed to be a short-term measure whilst your correct code is determined.

Q: What’s the difference between 500T and 0T tax codes?

The primary difference is the Personal Allowance provided. The 500T code gives you £5,000 of tax-free income across the tax year (roughly £417 per month if paid monthly), whereas 0T provides no Personal Allowance at all, you’re taxed on every pound you earn. The 0T code results in higher tax deductions than 500T, though both typically result in overpayment for most people.

Q: Does the 500T code affect my National Insurance contributions?

No, your tax code doesn’t directly affect your National Insurance contributions. National Insurance is calculated separately based on your earnings using different thresholds and rates. However, being on the 500T code means more tax is deducted, which reduces your net pay but doesn’t change your NI contributions.

Q: Should I inform my employer about my 500T tax code, or is this HMRC’s responsibility?

It’s beneficial to inform your employer that you have a 500T code and are taking steps to correct it. Whilst HMRC will notify your employer of any code changes, your employer can help by ensuring they’ve submitted accurate information to HMRC through Real Time Information (RTI) reporting. Your payroll department may also be able to advise you on the next steps.

Q: Can I challenge a 500T tax code if I believe it’s wrong?

Absolutely. If you believe you’ve been assigned the 500T code in error, contact HMRC immediately to explain your circumstances. Provide evidence of your employment status, previous tax codes, and any other relevant information. HMRC will review your case and issue a corrected code if appropriate.

Q: Will the 500T code affect my credit score or ability to get a mortgage?

Your tax code itself doesn’t appear on credit reports and won’t directly affect your credit score. However, being on the 500T code reduces your take-home pay, which could impact your ability to meet financial commitments if you’re not aware of the reduced income.

Q: If I’ve been on the 500T code for the entire tax year, how do I claim my refund?

If you’ve been on the 500T code for an entire tax year, you’ve almost certainly overpaid tax significantly. After the tax year ends (5 April), HMRC will review your records once they receive final information from your employer. They should automatically issue a refund if you’re due one. If you haven’t received a refund within a few months after the tax year ends, contact HMRC directly or make a formal claim using a P50 or P53 form.

The Bottom Line

The 500T tax code, whilst concerning when it first appears on your payslip, is a temporary situation that can be resolved with prompt action. Understanding what this code means, a reduced Personal Allowance of £5,000 operating on a non-cumulative basis, empowers you to recognise when you’re paying too much tax and take the necessary steps to correct it.

The key to resolving a 500T code situation lies in communication: contact HMRC, provide accurate information about your circumstances, ensure your employer has the correct details, and follow up to confirm that your code has been updated. By taking these steps, you’ll move from the temporary 500T code to your correct tax code, ensuring your tax deductions accurately reflect your entitlement to the Personal Allowance.

Remember that any tax you’ve overpaid whilst on the 500T code isn’t lost—it will be returned to you either through reduced deductions once your code is corrected or through a refund after the tax year ends. The important thing is to act quickly to minimise the period of overpayment and the impact on your finances.

The content provided on TaxCalculatorsUK, including our blog and articles, is for general informational purposes only and does not constitute financial, accounting, or legal advice.

You can also visit HMRC’s official website for more in-depth information about the topic.