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This guide explains what UK tax codes are and how employers work them out. You can also use the list to check what to do if you think you have the wrong tax code.
TAX CODE CHECKER HMRC: How do I tell if my tax code is correct?
Your employer or your pension provider calculates the tax codes. They use a tax code to work out an amount of Income Tax to deduct from your pay or from your pension.
HM Revenue and Customs inform them which code to use so they collect the correct amount from you. GOV.UK has an online facility for checking Income Tax online for the current year. It will show you:
- What your current tax code is (6th of April 2022 to 5th of April 2023).
- How they work out your tax code and the amount you are likely to pay.
Note: The HMRC help guide for understanding tax codes and their meanings is also available in Welsh language (Codau treth).
Understanding Your Tax Code Meanings UK
The tax code list 2022 shows the each code beginning with a number and ending with a letter. Most people who only have one job or pension will currently get the 1257L tax code.
So, how is this number worked out?
The standard personal tax allowance for 2022-23 is £12,570. Hence, HMRC take the first four digits to create a tax code. So, the base number can change at the beginning of each tax year.
The meaning of the numbers in a tax code is the important part. The tax code numbers give specific information to employers and to pension providers. That enables them to calculate how much tax-free income you can get in each tax year.
- The first step takes place by HM Revenue and Customs. They work out how much tax free Personal Allowance you have.
- Any extra income that you did not pay tax on then gets added up. It includes any untaxed interest or part-time earnings. In some cases it will also include the value of any tax on company benefits (e.g. a company car, loan, or accommodation).
- Any income that you have not paid tax on gets deducted from your Personal Allowance. The amount that remains is the tax-free income allowed in that current tax year.
- The final step removes the last digit in the tax-free income amount.
List of Tax Codes and What They Mean
Note: The UK tax codes letters refer to each separate situation. The letter also affects the Personal Allowance for each individual.
- Letter L: This tax code means you can get the standard tax-free Personal Allowance.
- Letter M: This tax code relates to the Marriage Allowance. It means you have received a transfer of 10% from your partner's Personal Allowance.
- Letter N: This is also associated with the Marriage Allowance. But, it means you transferred 10% of your own Personal Allowance to your spouse or partner.
- Letter S: This signifies your income or pension got taxed using Scottish Income Tax rates.
- Letter T: This tax code will include other calculations for working out Personal Allowances. It may get reduced because an estimated annual income is over £100,000.
- Tax Code 0T: The meaning relates to your Personal Allowance. This tax code means the amount got used up or you started a new job. In this case your employer may not yet have the details needed to issue you the right tax code.
- Tax Code BR: It is an abbreviation for 'basic rate' tax. Thus, all your income from one particular job or pension gets taxed at the basic rate. As a rule it gets used for people with more than one job or more than one pension.
- Tax Code D0: All your income from one particular job or pension gets taxed at the 'higher rate' of tax. As a rule it gets used for people with more than one job or more than one pension.
- Tax Code D1: All your income from one particular job or pension gets taxed at the 'additional rate' of tax. As a rule it gets used for people with more than one job or more than one pension.
- Tax Code NT: This is an abbreviation for 'no tax' due. It means you are not paying any tax on this particular form of income.
Tax Code W1 Meaning (or M1) at the End
Tax codes 'W1' or 'M1' signify that they are emergency tax codes (see below).
Tax Code K Meaning
Some people will see a letter 'K' at the beginning. It means you have income that is not getting taxed another way. In this case it would be worth more than the tax-free allowance. As a rule, this happens most when:
- You are paying tax owed from a previous year through salary or through a pension.
- You are getting benefits that you need to pay tax on. They can include state benefits as well as company benefits.
Special rules apply to these situations. In these cases it will be your employer or pension provider who takes any tax due. It relates to income not taxed from your wages or pension. This applies even if a different organisation pays the untaxed income to you.
Note: If you are on a K tax code your employer or your pension provider cannot take more than half your pre-tax wages or pension.
Emergency Tax Codes Explained 2022/23
There are three main emergency tax codes used in the United Kingdom. The payslip of anyone on an emergency tax code will display either:
- 1257 W1
- 1257 M1
- 1257 X
Being on an emergency tax rate means you pay a levy on all your income above the basic Personal Allowance. This might happen if you start:
- A new job or working for an employer after self-employment.
- Receiving company benefits or income from the UK State Pension.
Note: The amount of time you spend on emergency tax codes is a temporary process. You can get help updating a tax code from your employer.
How to Get Tax Code Update
Changing your job means you may get put on an emergency tax code. But, it gets corrected by HM Revenue and Customs. The automatic process takes place after you give some details to your new employer. They will need information about your previous income or pension.
Employers get the information from a P45. But they will ask you to provide the details if you do not have your P45.
There are several other reasons why HM Revenue and Customs update tax codes. It can occur any time you:
- Start getting income from an additional job or from a pension.
- Get a change to the income amount that you earn.
- Start or stop getting company benefits from your job.
- Receive taxable state benefits.
- Claim the Marriage Allowance or expenses that provide tax relief for employees.
Tax Code Change
The tax code adjustment made by HMRC means you pay the right amount across the year. HM Revenue and Customs will send you a letter or email once they complete the update.
HMRC also inform your employer or pension provider of the changes. Thus, when you get your next payslip you should see:
- The new tax coding.
- Any adjustments made to your pay (if paying an incorrect amount).
Informing HMRC: Change Tax Code Online
There are several steps you can take if you think the coding is wrong. When checking your tax code you can:
- Use the online tool to check your Income Tax and inform HMRC of any changes to your circumstances.
- You can also contact HM Revenue and Customs if you are unable to use the online checklist service.
Contacting HMRC for Someone Else
There may be times to inform HMRC of a change in circumstances for someone else. A typical example would be if you are their appointed tax agent or accountant. In this case, fill in a PAYE Coding Notice query form and state the changes.
List of Tax Codes and What They Mean in United Kingdom
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