NT means No Tax. Your employer deducts zero income tax from this income source. It applies to specific circumstances authorised by HMRC.
Zero per cent. That is the amount of income tax deducted from your pay when HMRC assigns you the NT tax code. Unlike every other code on your payslip, NT instructs your employer or pension provider to hand over your gross pay without touching it for tax purposes. It sounds like a gift, but it is anything but arbitrary. HMRC issues NT only in tightly defined circumstances, and misunderstanding it can leave you with a surprise Self Assessment bill.
HMRC does not hand out NT codes casually. The code applies to a narrow set of situations where the tax system has determined that no PAYE deduction is appropriate for a particular income source.
Non-UK residents with a Double Taxation Agreement. If you live in a country that has a tax treaty with the UK, you may be entitled to receive certain UK income (particularly pension income) without UK tax. You apply using form DT-Individual, and if HMRC approves, they issue NT to your pension provider. You then declare and pay tax in your country of residence instead.
UK income below the Personal Allowance. If your only UK income source is small enough that it falls entirely within your £12,570 Personal Allowance and you have no other income, HMRC may apply NT rather than assigning a standard code. This is rare for employment income but can occur with small pension payments.
Specific HMRC directions. In certain cases, HMRC issues NT following a review of your tax affairs. This might happen during a dispute resolution, when income is being reclassified, or when a particular payment is not subject to PAYE under legislation (for example, certain lump sum payments or compensation).
Income within the Trading Allowance. Self-employed individuals with gross trading income under £1,000 benefit from the Trading Allowance and owe no tax on that income. While this does not result in an NT code on a payslip (since it applies via Self Assessment), the principle is similar: HMRC has determined that no tax is due.
The most common use of NT is for UK expats receiving a UK pension while living abroad. The process is straightforward in theory but requires paperwork.
Step 1: Confirm your country has a Double Taxation Agreement (DTA) with the UK. Most major countries do, including Australia, Canada, France, Germany, Spain, the United States, and dozens more. The DTA determines which country has the right to tax your pension income.
Step 2: Complete form DT-Individual. This HMRC form asks for your personal details, proof of overseas tax residency (usually a certificate from the foreign tax authority), and details of the UK income you want exempted from UK tax.
Step 3: Submit to HMRC. Processing typically takes 4 to 8 weeks. If approved, HMRC sends an NT coding notice to your pension provider, who then stops deducting tax.
Step 4: Declare the income abroad. You are still liable for tax, just not in the UK. You must report the income to your local tax authority and pay whatever rate applies in your country of residence.
| Step | Action | Typical timeframe |
|---|---|---|
| 1 | Check DTA exists for your country | Same day |
| 2 | Complete form DT-Individual | 1-2 hours |
| 3 | HMRC processes application | 4-8 weeks |
| 4 | NT code issued to pension provider | Within 2 weeks of approval |
| 5 | Gross pension payments begin | Next pay cycle after coding |
Yes. The NT tax code affects income tax only. National Insurance contributions (NICs) are a separate system with separate rules.
If you are employed and on an NT code, your employer still deducts Class 1 NICs from your pay (provided your earnings exceed the Primary Threshold of £12,570 per year). If you are self-employed, Class 4 NICs are calculated through Self Assessment regardless of any PAYE coding.
The only scenario where NICs do not apply is if you are over State Pension age (currently 66, rising to 67 by 2028). Employees over State Pension age are exempt from employee NICs but their employer still pays employer NICs on their earnings.
Sarah moved to Sydney in 2023 and receives a UK occupational pension of £18,000 per year. Without any action, her pension provider deducts tax under the standard 1257L code.
Without NT (standard 1257L):
| Item | Amount |
|---|---|
| Gross pension | £18,000 |
| Personal Allowance | £12,570 |
| Taxable amount | £5,430 |
| Tax at 20% | £1,086 |
| Net pension received | £16,914 |
Sarah is also required to declare this income in Australia, where the UK-Australia DTA grants Australia the right to tax her pension. Australia gives her a foreign tax credit for the £1,086 already paid to HMRC, but the process creates double paperwork and cash flow issues.
With NT code applied:
| Item | Amount |
|---|---|
| Gross pension | £18,000 |
| UK tax deducted | £0 |
| Net pension received | £18,000 |
| Australian tax payable | Calculated under Australian rates |
Sarah applies via form DT-Individual, receives the NT code, and now deals with one tax authority instead of two. Her pension arrives in full each month, and she pays tax only in Australia.
An incorrect NT code is more dangerous than an incorrect standard code. If HMRC assigns NT to an income source that should be taxed and you do nothing, you accumulate a growing tax liability that will eventually be collected, plus potential interest.
Common situations where NT may be incorrect:
What to do if you suspect NT is wrong:
If you are self-employed and wondering whether NT applies to you, the short answer is: not directly. Self-employed individuals do not receive PAYE tax codes because their tax is calculated through Self Assessment, not deducted at source.
However, the Trading Allowance of £1,000 functions similarly. If your gross self-employment income is under £1,000 in a tax year, you owe no tax on it and do not need to register for Self Assessment. Above that threshold, you must register, file a return, and pay Income Tax plus Class 4 National Insurance on your profits.
For self-employed non-residents, the rules depend on whether you have a UK permanent establishment. If you are trading entirely from overseas with no UK base, your self-employment income may not be taxable in the UK at all, but this is determined through the DTA and Self Assessment, not through a PAYE code.
The typical timeline depends on your circumstances:
| Scenario | Expected processing time |
|---|---|
| DT-Individual for pension income | 4-8 weeks |
| HMRC-initiated NT (their review) | Immediate (appears on coding notice) |
| NT following a tax dispute | Varies, typically 2-12 weeks |
| Renewal of existing NT code | 2-4 weeks (annual confirmation may be required) |
Some DTAs require annual renewal of the NT code. HMRC may write to you each year asking you to confirm your overseas residency. If you fail to respond, they will remove the NT code and your pension provider will start deducting tax again at the standard rate.
Contact HMRC immediately if you believe your NT code is incorrect. The longer an incorrect code remains active, the larger the potential underpayment.
Online: Sign in to your Personal Tax Account at gov.uk and use the "Check your Income Tax" service. You can report a coding error directly through the portal.
By phone: Call 0300 200 3300. Have your National Insurance number, the income source details, and your most recent coding notice (form P2) available.
By post: Write to Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS. Include your NI number and a clear explanation of why you believe the code is wrong.
HMRC will review your case and issue a revised coding notice if they agree the NT code is incorrect. Any underpaid tax will typically be collected through an adjustment to your new code or, if the amount is large, through Self Assessment.
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