For the 2026/27 UK tax year, an employee starts a new job without providing a P45 or completing a starter checklist, and their employer places them on tax code 1257L on a Week 1/Month 1 (non-cumulative) basis. Under HMRC's PAYE rules, how does this non-cumulative basis differ from the normal cumulative basis used for most employees?
- It applies a higher rate of tax to every payment than the cumulative basis would, as a deliberate penalty for not providing a P45
- Each pay period is assessed in isolation using only that period's slice of the Personal Allowance and bands, ignoring pay and tax already received earlier in the tax year, whereas the cumulative basis carries forward unused allowance and totals from earlier periods
- It gives the employee a larger Personal Allowance than the standard 1257L cumulative code, since the 'Week 1/Month 1' marker adds an extra allowance for the first pay period
- It has no practical effect on the tax calculated compared with the cumulative basis; the W1/M1 marker is purely administrative and changes nothing about how tax is worked out
Why B? And why not the others?
Correct answer: B. Each pay period is assessed in isolation using only that period's slice of the Personal Allowance and bands, ignoring pay and tax already received earlier in the tax year, whereas the cumulative basis carries forward unused allowance and totals from earlier periods
On the normal cumulative PAYE basis, an employee's tax is worked out using their total pay and total allowance used so far in the tax year, so unused allowance from an earlier period rolls forward into later periods; on a Week 1/Month 1 (non-cumulative) basis, by contrast, HMRC ignores everything paid and taxed earlier in the tax year and instead calculates each period's tax using only that single week's or month's slice of the Personal Allowance and bands, as if that pay period stood alone, which is exactly what the correct option describes. The option claiming it applies a higher rate as a penalty is wrong because the non-cumulative basis does not change the rates or bands used, only the period over which allowance and income are assessed; any over- or under-payment that results is incidental, not a deliberate penalty. The option claiming it gives a larger Personal Allowance is wrong because the 1257L figure represents the same annual allowance divided the normal way into weekly or monthly slices; W1/M1 does not add any extra allowance. The option claiming it has no practical effect is wrong because ignoring prior pay and tax can produce a materially different, and often incorrect, result compared with the cumulative basis until HMRC issues a corrected code.
Source: GOV.UK: Emergency tax codes