The low-down on PAYE Tax Codes

If you receive any sort of income, HMRC will give you a PAYE Tax Code, which tells your employer or pension provider how much Income Tax you need to pay. These codes often change each year, and so here we explain what those numbers and letter actually mean.

 

What are Tax codes?

Depending on how much you earn, HMRC will decide which PAYE (pay as you earn) tax code you should be given and send this to your employer or pension provider. Your employer or pension provider then uses this code to calculate how much Income Tax you should be paying out of your salary/wages or pension.

Tax codes are made up of a series of numbers and letters: the number refers to the amount of income you can earn before you need to pay tax (your Personal Allowance), and the letter code (usually just one letter) refers to your situation, which might affect how much Personal Allowance you're entitled to.

Your tax code doesn’t contain any information about how much you earn or your total income, it only provides information about how much tax should be deducted from what you receive.

 

Tax Codes v0102

 

Your Tax code may change

Since the Personal Allowance is normally increased each tax year, your tax code will change accordingly on 6 April each year.

Your tax code can also change when your situation changes. For example, it is likely to change if you start to receive a State Benefit that you have to pay tax on (such as a State Pension), if you receive an income that isn’t already being taxed (like income from a house that you rent out), if you reclaim the tax from work expenses, or if you receive Benefits in Kind from your job (such as a Company Car or Health Insurance).

If you employment status changes, you may be moved on to an emergency tax code for a short time – this means that you’ll pay tax on all of your income above your Personal Allowance without modifications according to your situation. When you give your new employer your P45, which contains information of your previous income or pension, your tax code will be updated. If you don’t have a P45 from your old employer, your new employer might need you to complete a ‘new starter checklist’. 

 

Letter What it means
L Basic tax-free Personal Allowance
M Marriage Allowance (you’ve received 10% of your partners Personal Allowance)
N Marriage Allowance (you’ve given 10% of your Personal Allowance to your partner)
S Scottish rate of Income Tax
T The numbers section of your code includes other calculations that have changed your Personal Allowance
0T

Your Personal Allowance has been used up or your code needs to be updated because your tax details haven’t been passed on to your employer with a P45

BR All you income from your work or pension is taxed at the basic rate (usually if you have more that one job or pension)
D0 All you income from your work or pension is taxed at the higher rate (usually if you have more that one job or pension)
D1 All you income from your work or pension is taxed at the additional rate (usually if you have more that one job or pension)
NT You’re not paying an tax on this income
K

The income you receive is worth more than your tax-free allowance and isn’t being taxed any other way (such as paying tax from previous years, receiving taxable State benefit, or Benefits in Kind from your employer)

W1 OR M1

Stands for ‘Week 1’ or ‘Month 1’ and are emergency tax codes, which are used depending on whether you are paid weekly or monthly. They mean that you are only taxed based on what you have earned during that period and not the whole year (also known as ‘non-cumulative’ codes)

 

Where can I find my Tax code?

You can find your tax code on your employment or pension payslips, your P45 when you leave a job, your P60 from your employer at the end of each tax year, a PAYE Coding Notice from HMRC when your tax code is changed.

If you have more than one employer or pension provider, it’s likely that each payslip will use a different code.

 

Check your Tax details with GOV.UK

In April 2016, HMRC introduced the new Personal Tax account – this means that you can simply login online and check your tax information. The entire integrated system will be completed by 2020, meaning that a lot of information will already be collected from employers and other sources, so that you don’t have to inform HMRC yourself. 

To access your Personal Tax Account, you’ll need to register with GOV.UK Verify and have your identity checked by a Government Certified identity provider, like CitizenSafe.

At CitizenSafe, identity verification is the only thing we do – it’s our passion! After you’ve had your identity checked with us, you’ll be able to use that one login to access all available GOV.UK online services, whenever and wherever is most convenient for you!

 

Try our CitizenTax app!

Understanding the ins and outs of tax can be, well, taxing. So we created the CitizenTax app to help make tax a little simpler. CitizenTax is available through iTunes and GooglePlay, and you can use it to find out if you need a self-assessment, or calculate your Inheritance Tax or Net Salary. 

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