Question
Is there a simple, straightforward way of working out your tax code?Answer
It's not too difficult. Most tax codes are a number followed by a letter, worked out as follows:
Number - When multiplied by 10 the number gives the amount of income you can earn in a year before paying income tax, i.e. your available personal allowance. Unless you have a K code in which case it's the amount that must be added to your taxable income to take account of untaxed income you've received.
Letter – the letter tells HMRC what allowance, if any, you're eligible for.
Special Codes – if you have two or more sources of income you might have a two letter code, usually in relation to a second job or pension. This tells HMRC that your allowances have been applied to your main job or pension (for which you'll have a normal code).
Putting all this together:
1. Add up your tax allowances (for most people it's simply your personal allowance e.g. £6,475).
2. Add up any untaxed income and taxable employment benefits (let's assume £1,275).
3. Deduct the total in (2) from (1) (e.g. 6475 – 1275 = 5200).
4. Divide the balance in (3) by 10 and add the letter that suits your situation (e.g. 520L).
Is there a simple, straightforward way of working out your tax code?Answer
It's not too difficult. Most tax codes are a number followed by a letter, worked out as follows:
Number - When multiplied by 10 the number gives the amount of income you can earn in a year before paying income tax, i.e. your available personal allowance. Unless you have a K code in which case it's the amount that must be added to your taxable income to take account of untaxed income you've received.
Letter – the letter tells HMRC what allowance, if any, you're eligible for.
Special Codes – if you have two or more sources of income you might have a two letter code, usually in relation to a second job or pension. This tells HMRC that your allowances have been applied to your main job or pension (for which you'll have a normal code).
| Letter/Special Code | What it means |
|---|---|
| L | You're eligible for the basic personal allowance. |
| P | You're aged 65 to 74 and eligible for the full personal allowance. |
| Y | You're aged 75 or over and eligible for the full personal allowance. |
| T | There's other items HMRC needs to review in your tax code. |
| K | Your untaxed income on which tax is due is greater than your allowances. |
| BR | All your income is taxed at the basic rate of tax (most commonly used for a second job or pension). |
| D0 | All your income is taxed at the higher rate of tax (most commonly used for a second job or pension). |
| NT | No tax is to be taken from your income or pension. |
Putting all this together:
1. Add up your tax allowances (for most people it's simply your personal allowance e.g. £6,475).
2. Add up any untaxed income and taxable employment benefits (let's assume £1,275).
3. Deduct the total in (2) from (1) (e.g. 6475 – 1275 = 5200).
4. Divide the balance in (3) by 10 and add the letter that suits your situation (e.g. 520L).
Read this Q and A at http://www.candidmoney.com/questions/question423.aspx
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