Getting your tax code right
A simple guide to common tax problems
Step one, Find out which tax code you are on. You can find this:
- On your payslip
- On letters or emails from HMRC
- By checking your tax code on HMRC’s website and signing up to view your personal tax account here: https://www.gov.uk/check-income-tax-current-year
- By contacting HMRC: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees
Next, you need to try to understand your current tax code.
Common tax codes are listed below. Most people will be entitled to the personal tax free allowance, as it is the amount that you can earn per year that is not taxed, so the most common tax code is the first one on the list. But check the others listed to help you understand your code if it is different.
- L: The L in your tax code reflects that you are entitled to the basic ‘personal allowance’ for tax. 1257L is the most common tax code, it reflects that you have a personal allowance threshold of £12,570 (in 2021/22), which is the amount you earn before you are taxed. This usually changes after 5th April each year.
- M: This means you’re receiving 10% of your partners personal tax allowance
- N: This means that you have transferred 10% of your personal tax allowance to your partner
- S: This means your tax is calculated at Scottish rates
- C: This means your tax is calculated at Welsh rates
- BR: This means all of your income from your job or pension is taxed at the basic rate, which is 20%. You may be placed onto this as an ‘emergency tax code’ if you have changed jobs.
- D0: This is similar to BR and means you do not get any allowances but instead to tax everything at 40%
- W1, M1 or X codes: These are emergency codes, that may mean you need to contact HMRC
- K: This means that you have income that is not being taxed (e.g. state pension, benefits, etc) and this is worth more than your tax free personal allowance. If the amount of tax being deducted in this way is causing you financial hardship, contact HMRC.
- T: This means that there are items in your code that HMRC need to review each year, so that you receive a new tax code at the start of the year rather than rolling forward the old one.
- There are still other tax codes, and if you are unsure of what yours represents then do contact HMRC, or TaxAid for additional support.
Usually, you won’t need to do anything about your tax code, but if you don’t understand it you need to take action to make sure the right tax is paid during the year and you don’t get an unexpected bill.
Don’t’ forget – Claim the marriage allowance if you qualify – it can save you over £200 per year.