Tax Codes
Money, tax and benefits
Understanding your tax code
A tax code is used by your employer or pension provider to calculate the
amount of tax to deduct from your pay or pension. If you have the wrong tax
code you could end up paying too much or too little tax.
What is a tax code?
A tax code is usually made up of one letter and several numbers, for example:
117L or K497.
If your tax code is a number followed by a letter
if you multiply the number in your tax code by 10, you'll get the total amount
of income you can earn in a year before paying tax
the letter shows how the number should be adjusted following any changes to
allowances announced by the Chancellor - common tax code letters are
explained below
Common tax code letters and what they mean
L - is used if you are eligible for the basic personal allowance
P - is used if you are aged 65 to 74 and eligible for the full personal allowance
V - is used if you are aged 65 to 74, eligible for the full personal allowance
and the full married couple's allowance (for those born before 6 April 1935
and aged under 75) and estimated to be liable at the basic rate of tax
Y - is used if you are aged 75 or over and eligible for the full personal
allowance
T - is used if there are any other items HM Revenue & Customs (HMRC)
needs to review in your tax code, or if you ask HMRC not to use any of the
other tax code letters listed above
K - is used when your total allowances are less than your total 'deductions'
(read more under 'How the K code works')
More about personal and tax allowances
Other tax codes
If your tax code has two letters but no number, or is the letter 'D' followed
by a zero, it normally indicates that you have two or more sources of income
and that all of your allowances have been applied to the tax code and income
from your main job.
BR - is used when all your income is taxed at the basic rate - currently 22
per cent (most commonly used for a second job)
D0 - is used when all your income is taxed at the higher rate of tax -
currently 40 per cent (most commonly used for a second job)
NT - is used when no tax is to be taken from your income or pension
(If you have two jobs, it is likely that all of your second income will be taxed
at the basic or higher rate - depending on how much you earn. This is because
all of your allowances will have been used against the income from your main
job.)
How tax codes are worked out
Step one
Your tax allowances are added up (in most cases this will just be your
personal allowance and any blind person's allowance, in some cases it may
include certain job expenses).
Step two
Income you've not paid tax on (for example untaxed interest or part-time
earnings) and any taxable employment benefits are added up.
Step three
The total amount of income you've not paid any tax on (called 'deductions') is
taken away from the total amount of tax allowances. The amount you are left
with is the total of tax-free income you are allowed in a year.
Step four
To arrive at your tax code the amount of tax-free income you are left with is
divided by 10 and added to the letter which fits your circumstances.
Example:
The tax code 117L means:
you are entitled to the basic personal allowance
£1,170 must be taken away from your total taxable income
Where to find your tax code
If you're employed or between jobs
Your tax code is written on your P45 (given to you by your employer when you
stop working for them). This is why it's very important to give this to your
new employer when you change jobs.
If you've lost your P45 and want to find out your tax code contact your Tax
Office and give them your National Insurance number and tax reference
number.
If you're starting your first job
If you're starting your first job and don't have a P45, your employer will give
you a P46 to fill in and sign. Your employer will allocate a tax code and work
out the tax due. HMRC will process your P46 and, where necessary, revise
your tax code.
If you've paid too much tax, your employer will make the necessary
repayment. (If the tax year has ended before this is worked out, then HMRC
will make the repayment.) If you haven't paid enough tax your tax code can be
amended to collect the underpaid tax.
If you get a company or personal pension
You'll find your tax code on your 'notice of coding' sent to you by your Tax
Office after the start of each tax year (and at other times if your tax code
changes). You'll also find your tax code on notices and payslips from you
pension provider.
Contact details for all Tax Offices (opens new window)
Find your Tax Office through an HMRC Enquiry Centre (opens new window)
Changes that might affect your tax code
You must keep HMRC informed of any change in your circumstances, for
example if:
you get married, form a civil partnership or separate and either of you was
born before 6 April 1935
you start to receive a second income
the amount of untaxed income you get increases or reduces
If you do not do this you could end up paying the wrong amount of tax.
If HMRC changes your tax code, you should receive a 'notice of coding' from
your Tax Office. Keep all notice of coding letters for reference in case you
have any questions or need to check you are paying the right level of tax.
Understanding your tax code
A tax code is used by your employer or pension provider to calculate the
amount of tax to deduct from your pay or pension. If you have the wrong tax
code you could end up paying too much or too little tax.
What is a tax code?
A tax code is usually made up of one letter and several numbers, for example:
117L or K497.
If your tax code is a number followed by a letter
if you multiply the number in your tax code by 10, you'll get the total amount
of income you can earn in a year before paying tax
the letter shows how the number should be adjusted following any changes to
allowances announced by the Chancellor - common tax code letters are
explained below
Common tax code letters and what they mean
L - is used if you are eligible for the basic personal allowance
P - is used if you are aged 65 to 74 and eligible for the full personal allowance
V - is used if you are aged 65 to 74, eligible for the full personal allowance
and the full married couple's allowance (for those born before 6 April 1935
and aged under 75) and estimated to be liable at the basic rate of tax
Y - is used if you are aged 75 or over and eligible for the full personal
allowance
T - is used if there are any other items HM Revenue & Customs (HMRC)
needs to review in your tax code, or if you ask HMRC not to use any of the
other tax code letters listed above
K - is used when your total allowances are less than your total 'deductions'
(read more under 'How the K code works')
More about personal and tax allowances
Other tax codes
If your tax code has two letters but no number, or is the letter 'D' followed
by a zero, it normally indicates that you have two or more sources of income
and that all of your allowances have been applied to the tax code and income
from your main job.
BR - is used when all your income is taxed at the basic rate - currently 22
per cent (most commonly used for a second job)
D0 - is used when all your income is taxed at the higher rate of tax -
currently 40 per cent (most commonly used for a second job)
NT - is used when no tax is to be taken from your income or pension
(If you have two jobs, it is likely that all of your second income will be taxed
at the basic or higher rate - depending on how much you earn. This is because
all of your allowances will have been used against the income from your main
job.)
How tax codes are worked out
Step one
Your tax allowances are added up (in most cases this will just be your
personal allowance and any blind person's allowance, in some cases it may
include certain job expenses).
Step two
Income you've not paid tax on (for example untaxed interest or part-time
earnings) and any taxable employment benefits are added up.
Step three
The total amount of income you've not paid any tax on (called 'deductions') is
taken away from the total amount of tax allowances. The amount you are left
with is the total of tax-free income you are allowed in a year.
Step four
To arrive at your tax code the amount of tax-free income you are left with is
divided by 10 and added to the letter which fits your circumstances.
Example:
The tax code 117L means:
you are entitled to the basic personal allowance
£1,170 must be taken away from your total taxable income
Where to find your tax code
If you're employed or between jobs
Your tax code is written on your P45 (given to you by your employer when you
stop working for them). This is why it's very important to give this to your
new employer when you change jobs.
If you've lost your P45 and want to find out your tax code contact your Tax
Office and give them your National Insurance number and tax reference
number.
If you're starting your first job
If you're starting your first job and don't have a P45, your employer will give
you a P46 to fill in and sign. Your employer will allocate a tax code and work
out the tax due. HMRC will process your P46 and, where necessary, revise
your tax code.
If you've paid too much tax, your employer will make the necessary
repayment. (If the tax year has ended before this is worked out, then HMRC
will make the repayment.) If you haven't paid enough tax your tax code can be
amended to collect the underpaid tax.
If you get a company or personal pension
You'll find your tax code on your 'notice of coding' sent to you by your Tax
Office after the start of each tax year (and at other times if your tax code
changes). You'll also find your tax code on notices and payslips from you
pension provider.
Contact details for all Tax Offices (opens new window)
Find your Tax Office through an HMRC Enquiry Centre (opens new window)
Changes that might affect your tax code
You must keep HMRC informed of any change in your circumstances, for
example if:
you get married, form a civil partnership or separate and either of you was
born before 6 April 1935
you start to receive a second income
the amount of untaxed income you get increases or reduces
If you do not do this you could end up paying the wrong amount of tax.
If HMRC changes your tax code, you should receive a 'notice of coding' from
your Tax Office. Keep all notice of coding letters for reference in case you
have any questions or need to check you are paying the right level of tax.