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How to add an emergency tax code to an employee’s payroll profile

This article explains how to add an emergency tax code to a new or existing payroll profile for an employee in FreeAgent.

When setting up payroll in FreeAgent, you will need to create a payroll profile for each employee who will be included on the payroll. This includes entering a tax code, which should only be changed if you receive a coding notice from HMRC. An emergency tax code will have a ‘W1’, ‘M1’ or ‘X’ suffix.

Please note that you will need full (level 8) access to FreeAgent in order to create a payroll profile for a new employee or edit an existing payroll profile.

Adding an emergency tax code to a new payroll profile

To add an emergency tax code as part of the process of creating a new payroll profile, navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

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Select ‘Add an Employee’ from the right-hand side of the ‘Employees’ section and select the employee’s name from the drop-down menu. If the employee’s name does not appear in the drop-down menu, you will need to add them as a user.

Please note that each employee should have their own payroll profile and a profile should never be updated and used for another employee.

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Scroll down to the ‘Tax & NI’ section and enter the emergency tax code in the ‘Tax Code’ field. 

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Don’t enter the ‘W1’, ‘M1’ or ‘X’ suffix in the tax code field. Instead, select ‘Yes’ for the ‘Make deductions on a Week 1/Month 1 basis?’ option. Please note that this option should only be selected if your employee has been given an emergency tax code by HMRC, an emergency tax code is listed on their P45 or they don't have a P45 and the starter declaration information instructs you to do so. 

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Once you’ve entered the appropriate tax code, enter the remaining information and select 'Create Payroll Profile' to complete the process. For more information on creating a payroll profile, please see this article.

Adding an emergency tax code to an existing payroll profile

To add an emergency tax code to a payroll profile that you’ve already created, navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

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Select ‘Edit Profile’ on the right-hand side of the ‘Employees’ section next to the relevant employee’s name.

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Scroll down to the ‘Tax & NI’ section and enter the emergency tax code in the ‘Tax Code’ field. 

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Don’t enter the ‘W1’, ‘M1’ or ‘X’ suffix in the tax code field. Instead, select ‘Yes’ for the ‘Make deductions on a Week 1/Month 1 basis?’ option. Please note that this option should only be selected if you have received a coding notice from HMRC.

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To complete the process, select ‘Update Payroll Profile’ at the bottom of the screen.

What happens next?

When you next run payroll, the employee’s tax and National Insurance contributions will be calculated based on that month’s pay in isolation, rather than on an annual basis.

When HMRC issues a new tax code for the employee, you’ll need to edit their payroll profile and update the tax code. To do this, scroll down to the ‘Tax & NI’ section, enter the new tax code in the ‘Tax Code’ field and select ‘No’ to ‘Make deductions on a Week 1/Month 1 basis?’. Select ‘Update Payroll Profile’ at the bottom of the screen to complete the process.

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