Tax codes can seem pretty scary, especially when you’re not too sure what they are or what they’re used for. In this article we answer some of your most frequently asked questions about tax codes.

What is a tax code?

A tax code is simply a series of numbers and letters allocated by HMRC to show how much tax you should be paying. Your employer or pension provider uses it to work out how much tax to deduct from your wages or pension.

Most people have the same basic tax code, but HMRC will send out a ‘Notice of Coding’ if yours changes. This might be because you have more than one job or receive a pension, or if you ask HMRC to collect your Self Assessment tax bill through your tax code.

What do the numbers in my tax code mean?

The numbers in your tax code show how much income you can receive in a tax year before you need to start paying tax on it. Known as the Personal Allowance, your employer will normally spread this out across what you’re expected to earn in the tax year, rather than suddenly starting to make deductions part-way through!

Your Personal Allowance is represented by the digits in your tax code – the numbers are simply the allowance divided by 10. For example, where the tax code is 1257L, the taxpayer is entitled to a Personal Allowance of £12,570. Anything you earn beyond that amount will be subject to Income Tax.
 

What does the letter in my tax code stand for?

The letters in a tax code each have their own unique meaning and are representative of your personal circumstances. We break down some of the most common ones below.
 

Where can I check my tax code?

Your tax code will be shown on your payslips that you receive from your employer each time they pay you. You can also check it by logging into your Personal Tax Account.

If you think your tax code might be wrong, it’s important to get this amended as soon as possible so you aren’t underpaying or overpaying on your Income Tax. If you don’t, you may very well find yourself facing an unexpected tax bill or even missing out on a tax rebate.

The responsibility lies with you, the taxpayer, to make sure your tax code remains accurate and up to date. So, speak to your employer if you think there has been a mistake, or let HMRC know.

 
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