Tax codes can seem quite confusing but is an important code that dictates the amount of money we receive from our wages. Below is a simple and easy-to-understand guide that explains all aspects of the various tax codes which exist.
Your tax code is made up of a series of numbers and letters.
Numbers
The numbers explain the amount of tax-free income you get in a year. Therefore, if your tax code has 1257 in it you can earn £12,570 before any tax is payable.
Letters
| L | You’re entitled to the standard tax-free Personal Allowance. The 2022/23 personal allowance is £12,570 |
| M | Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance |
| N | Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner |
| T | Your tax code includes other calculations to work out your Personal Allowance |
| 0T | Your Personal Allowance has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code |
| BR | All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension) |
| D0 | All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension) |
| D1 | All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension) |
| NT | You’re not paying any tax on this income |
| S | Your income or pension is taxed using the rates in Scotland |
| C | Your income or pension is taxed using the rates in Wales |
| W1, M1 & X | Your personal allowance is calculated on a non-cumulative basis, meaning that your year-to-date earnings aren’t considered. Therefore, you just get a proportion of your personal allowance allocated to your payslip, the amount depends on your pay frequency, (e.g. monthly = 12th, weekly = 52nd) |
| K | If your tax code begins with a K it means that you have other income (not your employed income) that needs to be taxed so it is deducted from your employment income. |
if you want to find out more please use the following link: https://www.gov.uk/tax-codes/what-your-tax-code-means
