What Is A Tax Code And How To Check Yours

A tax code is used to show how much tax is taken from your income.

Each code is made up of a letter and numbers to show how much tax-free entitlement you have per year.

Employers apply these codes to calculate how much tax should be taken out of your salary.

It’s vital to make sure you’re on the right tax code to avoid paying too much or too little tax.

You can usually check your tax code on your latest payslip. Speaking with your HR department or accounts department

Alternatively you can log into your tax online or via the HMRC app to access your current tax code and other information about your employment history.

You can also contact HMRC by post or via phone on 0300 200 3300 (if you’re outside of the UK it’s +44 135 535 9022).

If you think your tax code is wrong, it’s important to check that HMRC has all of the up to date information about your work history and income.

If you think you’ve paid too much tax, you can submit a form to claim a tax refund online.

The standard tax-free personal allowance is currently £12,570 so the most common tax code for UK employees is 1257L.

Typically, that means you can earn up to £12,570 before tax applies. Other common tax codes include:

• BR – taxes extra income sources at the basic tax rate of 20%
• D0 – applies a 40% tax rate on all income from a specific source e.g. a high-paying second job
• NT – means ‘no tax’ which applies to foreign workers exempt from UK tax.

Your tax code might change for several reasons including:

• Tax changes – if the government changes the tax-free personal allowance, this will be reflected in your tax code
• Job changes – getting a pay rise or new job could result in your tax code being updated
• Receiving a pension – starting to receive will result in your tax code being changed..

It’s possible to have more than one tax code if you have multiple income sources.

For instance, if you have two jobs, each employer will use a different tax code for you. If you receive other forms of income, say a pension, whole working, each income source has its own tax code too.

Juggling multiple tax codes can become tricky so it’s important to pay careful attention. Each code affects how much tax is taken out from the income you receive so it’s vital to make sure it’s right. It also helps avoid an unexpected tax bill landing on your doorstep.

If you think your tax code is wrong, it’s important to get in touch with HMRC as quickly as possible.

An emergency tax code is a temporary code used by HMRC to tax your income.

It usually applies when it doesn’t have your income details after a change in your circumstances such as starting a new job or taking a taxable lump sum out of your pension.

Currently, if your tax code has W1, M1 or X at the end you’re being taxed using an emergency tax rate.

Here’s a full list of the tax codes you might see and what they mean, according to HMRC: