I hire on a very occasional basis a lady to provide cover in my business.  This occasional worker has state pension and private pension payments of around £5,500 per annum.  As her take home pay from me is around £2,000 I think she shouldn't be paying any tax.  However, until HMRC tell me differently I have set her on an emergency tax code which means she is having her earnings from me taxed at 20%.  I know she shouldn't be paying tax and when HMRC sort out her new code she will receive a refund, but that doesn't help her now as she will be missing vital income due to the emergency tax situation.  Would it be in order for me to take this occasional worker off the emergency tax code and indeed give her a tax code which doesn't cause her to pay tax at all before HMRC say that I can?

The following is the best thing to do. The employee should prepare all her information beforehand, then ring up HMRC herself on 08453 000 627, and explain to them her situation. Assuming they are satisfied they will issue a new code immediately. If the employer operates his PAYE electronically he will receive it almost immediately and can start to apply it straight away. If he does not operate his PAYE electronically he will need to wait to receive the new notice of coding in the post.