NT Tax Code: What It Means and Why You Have It

An NT tax code is one of the more unusual codes HMRC can assign to your income.

Most tax codes tell your employer how much income to protect from tax. An NT tax code tells them to deduct nothing at all.

If you have spotted an NT tax code on your payslip, it is understandable to question it.

The NT tax code is not a mistake in most cases. It reflects a situation HMRC has assessed and approved.

An NT tax code may apply to a single income source while others are taxed normally.

Knowing why your NT tax code was issued could help you avoid unexpected tax bills later.

This article explains when an NT tax code may apply. It also covers National Insurance, non-residency, and what to do if the code appears incorrect.

Understanding the NT tax code in full could also clarify whether any separate tax reporting is needed on your part.

Read on to find out where you stand.

NT Tax Code Explained: What the Letters Actually Mean

Every PAYE tax code in the UK is made up of a number and one or more letters.

The letter “L”, for example, indicates entitlement to the standard Personal Allowance for the tax year.

The NT tax code is different. It contains no number and stands alone.

NT stands for “no tax.” No income tax is deducted, regardless of how much you earn from that source.

When HMRC issues an NT tax code, your employer or pension provider is instructed to pay your income in full.

NT Tax Code Circumstances: When HMRC Issues No-Tax Status

HMRC operates a defined set of circumstances under which an NT tax code may be appropriate.

These situations are assessed individually. The code is not issued automatically and typically requires a formal agreement or legal arrangement.

The main situations where an NT tax code tends to apply include the following:

• Bankruptcy proceedings: if you are employed or receiving pension payments after being declared bankrupt, an NT tax code may apply from the bankruptcy start date until 5th April.
• Double taxation agreements: if you live in a country with a double taxation treaty with the UK, an NT tax code could prevent the same income being taxed in both countries.
• Statutory exemptions: certain payments outside the definition of ‘pay’ under HMRC rules — including some disability pensions — may attract an NT tax code.
• National Insurance-only situations: in some cases a worker owes National Insurance but not income tax through PAYE. This is reflected via an NT tax code on the employer’s Full Payment Submission.
• Specific professions: HMRC’s Employment Income Manual and PAYE Manual outline employment categories where income may not be treated as taxable PAYE earnings.
• Ministers of religion: in narrow circumstances, such as a monk or nun who has assigned income to a religious order, an NT tax code may be appropriate.

Each of these reflects a specific legislative or HMRC policy position. The circumstances need to be verified individually.

How Double Taxation Agreements Affect Your Tax Code

A double taxation agreement (DTA) is a treaty between two countries. It is designed to prevent the same income being taxed twice.

The UK has DTAs in place with many countries around the world.

When you are resident in a DTA country, HMRC may issue an NT code on UK income.

This reflects that the income is exempt from UK income tax under the terms of the agreement.

DTA rules are complex and vary significantly depending on the treaty in question.

Each agreement sets out specific conditions relating to income type and residency status.

Consulting the relevant treaty directly through GOV.UK is advisable before treating NT tax code status as a given.

NT Tax Code for Non-UK Residents

Non-UK residents frequently encounter an NT tax code on employment income earned from UK sources. It can also affect non resident landlords who receive rental income from the UK.

UK non-residency tax is a nuanced area. The treatment of your income depends on your country of residence and the nature of your UK work.

Whether a DTA applies is also a key factor. In many non-residency scenarios, income outside the UK tax net may attract an NT tax code.

This instructs the UK employer not to operate PAYE at all. In other cases, only certain income streams carry the NT code.

HMRC occasionally issues the code provisionally while tax status is being determined.

Reviewing your coding notice and verifying it against your actual residency status could prevent an unexpected liability.

How to Apply for an NT Tax Code as a Non-Resident

Non-residents applying for an NT tax code under a double taxation agreement typically need to complete the DT-Individual form.

This is HMRC’s official Double Taxation Treaty Relief form for individuals. It is available to download from GOV.UK.

The form asks for details of your UK income source and country of residence.

Your pension or employment reference information is also required.

Once completed, it must be certified by your local tax authority. This confirms you are a tax resident in your country of residence.

You then submit the certified form to HMRC by post to the address given on the form.

Some countries have their own specific double taxation relief forms. HMRC can confirm which applies to your country of residence.

Processing times vary considerably. HMRC typically takes several weeks to several months to assess an application.

Starting the process before your first payment is due is advisable. Tax deducted before the NT code is in place may need to be reclaimed separately.

Once HMRC approves the application, they notify your pension provider or employer directly. The NT code is then applied to future payments.

Completing a form P85 leaving the UK is also recommended as this confirms the date that you officially left the UK.

National Insurance When You Have No-Tax Status

A common question among those with an NT tax code is whether National Insurance contributions still apply.

In most of these situations, the answer is yes.

The code removes the requirement to deduct income tax from your pay.

It does not, in most circumstances, remove your obligation to pay National Insurance.

Your employer is typically still required to deduct employee National Insurance contributions normally.

These are reported to HMRC via Full Payment Submissions.

Income tax and National Insurance are calculated independently. Exemption from one does not create exemption from the other.

Cumulative Versus Week 1 or Month 1: What the Difference Means

Tax codes in the UK can be issued on a cumulative or non-cumulative basis.

This distinction affects how your employer calculates deductions throughout the tax year.

On a cumulative basis, your employer takes into account all pay received since 6th April.

Any overpaid tax from earlier in the year could potentially be refunded through payroll as the year progresses.

On a Week 1 or Month 1 (W1/M1) basis, each pay period is treated in isolation.

Your employer applies the code to that period only, without reference to earlier payments.

On a W1/M1 NT code, no payroll refunds are processed. Any overpaid tax from earlier in the year will normally have to be reclaimed directly from HMRC.

NT Tax Code Errors: How to Check Yours Is Correct

Tax codes can sometimes be issued incorrectly. An NT tax code applied in error could mean you are underpaying income tax without realising it.

HMRC may seek to recover any shortfall in a later tax year, resulting in an unexpected bill.

Your PAYE coding notice which is updated in your personal tax account sets out the tax code HMRC has instructed your employer to use.

It also explains the reasoning. If the explanation does not match your circumstances, contacting HMRC directly is advisable.

Your personal tax account or the HMRC app are (especially when you are living outside the UK) useful ways to check the code HMRC currently holds for you.

You can access your PTA at gov.uk using your Government Gateway login. It shows your current tax code for each employer or pension, and flags any recent changes HMRC has made.

For those with multiple income sources, an NT tax code on one stream may be part of a broader arrangement.

Tax may instead be accounted for through a Self Assessment return.

If you are uncertain whether this is in place, reviewing the position early could help avoid complications at year end.

For more information on how PAYE codes work, see the tax code guide on taxrebateservices.co.uk.

NT Tax Code: A Quick Summary

An NT tax code is not something most UK taxpayers encounter. When it appears, understanding why it has been issued matters.

The code means your income source is currently exempt from income tax deduction at source.

It tends to apply in well-defined circumstances, from double taxation agreements to entertainment industry arrangements.

National Insurance obligations typically remain in place regardless. Checking that the code reflects your actual situation is a sensible step.

Key Takeaways

• An NT tax code instructs your employer or pension provider to make no income tax deductions from that income source.
• HMRC issues NT tax codes in specific circumstances, including bankruptcy, double taxation agreements, statutory exemptions, and certain entertainment industry arrangements.
• National Insurance contributions are typically still deducted in the usual way even when an NT tax code is in place.
• An NT tax code may be issued on a cumulative or Week 1/Month 1 basis, which affects whether overpaid tax can be refunded through payroll.
• Non-UK residents often receive an NT tax code on UK income, though rules vary depending on residency status and any applicable double taxation treaty.
• If your NT tax code does not appear to match your circumstances, reviewing your PAYE coding notice and contacting HMRC could prevent an unexpected tax liability.

NT Tax Code: Frequently Asked Questions

What does an NT tax code mean?

An NT tax code means HMRC has instructed your employer to make no income tax deductions from that income source.

NT stands for ‘no tax.’ The code contains no number and applies regardless of earnings from that source.

Why have I been given an NT tax code?

HMRC typically issues this code in specific circumstances, including bankruptcy, a double taxation agreement, or entertainment industry arrangements.

HMRC does not issue the code generally. Your PAYE coding notice should set out the reasoning if you are uncertain.

Do I still pay National Insurance with an NT tax code?

In most cases, yes. This code affects income tax deductions only.

Your employer is generally still required to deduct National Insurance contributions and report them to HMRC via Full Payment Submissions.

Can an NT tax code be issued by mistake?

Yes, it is possible for an NT tax code to be issued incorrectly. If applied in error, you may be underpaying income tax.

HMRC could seek to recover any shortfall in a later year. Contacting HMRC to query the code is recommended if it appears incorrect.

What is the difference between a cumulative and Week 1/Month 1 NT tax code?

On a cumulative basis, your employer considers all pay since 6th April. Overpaid tax from earlier in the year may be refunded through payroll.

On a Week 1 or Month 1 basis, each pay period is treated in isolation. Any overpaid tax from earlier in the year must be reclaimed directly from HMRC.