Britons are urged to check they are on the correct tax code or they risk paying the wrong amount of tax.
A tax code is made up of a series of numbers and letters with the numbers indicating how much a person can earn each year without paying tax.
The tax code most Britons will be on is 1257L, meaning this person has the standard Personal Tax Allowance of £12,570.
This means they can earn up to this amount each year before paying any tax on their income.
This code will apply to most people who have just one job, with no unpaid tax or taxable benefits.
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If a person is on the wrong tax code and is underpaying, they may get a bill from HMRC to pay back the difference at the end of the year.
A person can find their tax code on their payslip or on a Tax Code Notice letter from the HMRC, if an individual receives one from the authority.
A person can also check their tax code and their Personal Allowance using a tool on the Government website.
The tool can also help a person plan ahead as it can forecast how much income they will get from their current jobs and pensions, and what tax they may pay for the current year.
A person can also update the details about their income and employment and pension provider to make sure they are on the correct tax code and pay the correct amount.
To use the checker tool, a person will need to sign into their personal tax account using their Government Gateway user ID – this can be set up on the Government website.
These are the letters that may appear in a tax code and what they mean:
- L – The person is entitled to the standard tax-free Personal Allowance of £12,570
- M – Marriage Allowance: they have received a transfer of 10 percent of their partner’s Personal Allowance, which is £1,260
- N – Marriage Allowance: they have transferred 10 percent of their Personal Allowance to their partner
- S – Their income or pension is taxed using the rates in Scotland
- T – Their tax code includes other calculations to work out their Personal Allowance, such as if it is reduced because they have a high income
- 0T – Their Personal Allowance has been used up or they have started a new job and their employer doesn’t have the details they need to give them a tax code
- BR – All their income from their job or pension is taxed at the basic rate
- D0 – All their income from this job or pension is taxed at the higher rate
- D1 – All their income from this job or pension is taxed at the additional rate
- NT – They are not paying any tax on this income
- K – Income not taxed another way that is not worth more than the tax-free allowance.
