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Understanding HMRC tax codes

A tax code is made up of letters and numbers, and is usually shown on your payslip.

 

 

What do the tax code letters mean?

As a general guide, you need to multiply your tax code by 10 to get the total amount of income you can earn each year before being taxed.

For example, the number 1000 was an indication of the proportion of your salary which would have been tax-free in the 2014/2015 tax year, which would be £10,000.

Tax code letters

The tax code letter, which generally comes after the number, gives your employer further information on the types of allowance you receive or the rate of tax that should be charged.

The tax codes below are the most common ones you will come across:

 

BR

All your pay from this source is taxed at the basic rate. This is because your allowances have already been used up against your other income.

K

Total deductions exceed your allowances. If the untaxed income on which tax is still due is greater than your annual allowances, you'll be given a K code to ensure that you pay tax on the excess.

While other tax code numbers indicate the amount you can have tax-free, the number in a K code multiplied by ten broadly indicates how much must be added to your taxable income. This is done to take account of the excess, untaxed income you received.

L

You are entitled to the basic personal allowance for a person under the age of 65.

NT

You pay no tax on this income.

T

Used if your tax office needs to review your tax code – for example, if your tax affairs are complex. You can ask for a T code to keep your personal details confidential.

 

Are you on the wrong tax code?

If you were on the wrong tax code, you may be owed a rebate. Use our Tax Rebate Calculator to see an estimate of what is due to you.

Alternatively, speak to one of our tax refunds consultants for a free, no-obligation consultation.

Call us on +44 (0) 80 8141 5503 or email us for a free assessment.

1st Contact Tax Refunds is not affiliated with HMRC. Read more.

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