This is everything you need to know about the tax codes in England, and what they mean.
Tax codes can seem complicated, but are actually fairly easy to get the hang of.
Everyone’s tax code contains letters and numbers, which are used by employers and pension providers.
The specific numbers and letters in your tax code indicate:
- How much of your income is tax free
- How much tax you pay above the Personal Allowance
- Whether there are any other circumstances that need to be taken into account
Here is a breakdown of what each part of your tax code means.
What the numbers mean
The numbers in the codes tell your employer or pension provider how much tax free income you get in each tax year.
For the vast majority of people who have one job or pension, the numbers in their tax code will be ‘1250’, reflecting the current tax-free Personal Allowance of £12,500.
What the letters mean
The letters in the codes refer to your employment situation, and how much tax you are due to pay. It gives employers the information they need to take the right amount of tax from your pay slip each month.
The letters used in your tax code can differ depending on what part of the UK you live in, we are focusing of the codes for England
Standard tax code letters
L – This code entitles you to the standard tax-free Personal Allowance
M – This code refers to the Marriage Allowance, and means that you’ve received a transfer of 10 per cent of your partner’s Personal Allowance
N – This is another Marriage Allowance code, and means that you’ve transferred 10 per cent of your Personal Allowance to your partner
T – This signals that your tax code includes other calculations needed to work out your Personal Allowance
0T – This means your Personal Allowance has been fully used, or that your new employer doesn’t have the details they need to give you a tax code
BR – This means that all the income from this job or pension is taxed at the basic rate
D0 – All your income from this job or pension is taxed at the higher rate
D1 – All your income from this job or pension is taxed at the additional rate
NT – This income is not taxed
CD1 – All your income from this job or pension is taxed at the additional rate in Wales
Emergency Tax Codes
The emergency tax codes are 1250 W1, 1250 M1, and 1250 X.
These will appear on your payslip if you have started a new job, are working for an employer after being self-employed, or are getting company benefits or the State Pension.
Emergency tax codes are temporary, and mean that you will pay tax on all your income above the basic Personal Allowance.
Tax codes that begin with a ‘K’ mean that a person has income that is not being taxed another way. It means that your employer or pension provider is taking the tax due on your income that has not been taxed – even if that income is from another organisation.
This usually happens if someone is having to pay tax they owe from a previous year through wages or pension, or if you are receiving benefits that you need to pay tax on.