10 Jun What does my tax code mean?
Ever wondered what your tax code actually means?
We’ve put together a guide which will help you understand the mystery behind your tax code.
1257L
1257L reflects the amount of income everyone can earn before paying tax (£12,570, with the zero removed from the code)
It’s used for most people with one job and no untaxed income, unpaid tax or taxable benefits
Your tax code can change either upwards or downwards depending on your circumstances The letter L is what most taxpayers will see. It means you are entitled to the personal allowance
BR
Tax is deducted from all income at the basic rate. Most commonly used when an employee has two jobs and their personal allowance is already being used in the other employment.
0T
Tax is deducted from all income. There is no Personal Allowance.
Most commonly used when an employee has not given you a P45 or enough details to work out their tax code, or when their Personal Allowance has been used up
M
Tax is deducted at basic, higher and additional rates depending on the amount of taxable income.
For an employee whose spouse or civil partner has transferred some
N
Tax is deducted at basic, higher and additional rates depending on the amount of taxable income.
For an employee who has transferred some of their Personal Allowance to their spouse or civil partner.
NT
No tax is deducted.
Used in very specific cases, for example musicians who are regarded as self-employed and not subject to PAYE
T
Tax is deducted at basic, higher and additional rates depending on the amount of taxable income.
Used when HMRC needs to review some items with the employee. For instance, if you earn more than £100,000 a year then £1 of your allowance is deducted for every £2 you earn over that amount.
K
Used when your tax deductions already owed to HMRC from previous years are greater than your Personal Allowance.
This code results in more tax being collected in comparison to having a standard tax code because your personal allowance is reduced to allow for more tax to be taken from your salary.
Emergency Codes
Emergency tax codes are a temporary tax status given to employees until HMRC works out which tax code applies.
You might be placed on emergency tax because you don’t have a P45 or you have recently switched from being self-employed.
Emergency tax codes are usually:
- 1257 W1
- 1257 M1
- 1257 X
Think your tax code is wrong?
If you think your tax code is wrong, you should contact HMRC and ensure they have the correct information so they can work out your correct tax code. Your tax code will then be updated automatically.
Check your next payslip. Make sure your new tax code is in place and this will then ensure your tax deductions have been adjusted accordingly.