How to check your tax code and what it means - Times Money Mentor (2023)

Here's how to check your UK tax code and what the different tax codes mean.

Your tax code is a simple series of numbers and letters that your employer orpension providerUsed to calculate how muchincome taxfrom your salarypension.

You can have a wrong tax code for several reasons. It is important to check this as providing the wrong tax code could mean you or HMRC owe money.

In this article we discuss:

• How do I verify my tax code?
• What does my tax code mean?
• Why has my tax code changed?
• Do I get a tax refund if my code is incorrect?

Read more:use ourincome tax calculatorcalculate pick-up wages.

What is a tax code?

Your tax code states for your employer or pension provider how much income tax must be withheld from your wages or pension.

HMRC issues a tax code for anyone enteringPAYE (pay what you earn)system. You do not choose your code yourself.

PAYE is simply how HMRC collects income taxsocial Securitydirectly from your pay as you go, not throughannual tax returnyou will solve yourself.

Part-time and full-time employees and benefit recipientsprivate pensionsit will therefore have a tax code. You don't have a tax code if you're self-employed because all of your income is taxedself confidence.

If you enter the wrong tax code, you may pay too little or too much tax. It is your responsibility, not your employer's, to repay any money you owe HMRC.

How do I verify my tax code?

There are several places to find your tax code:

• Your payroll
• P45 - a form you get from your employer when you leave your job
• Q60: Your annual tax refund from your employer
• Special pagewebsite gov.uk– you need to log in or register to get your government gate ID
• HMRC-app
• In the HMRC tax code tax letter, if you received one
• The HR department in your work
• Your pension declaration

What are the different tax codes?

The tax code is a combination of numbers and letters. The numbers in the tax code represent the tax-free income you are entitled to in that tax period.

Most UK taxpayers are entitled to a personal deduction. This is currently £12,570 per annum for the 2023/2024 tax year. If you have no other income, you can earn tax-free up to this amount.

This number may be higher if you apply for a marriage allowance orbenefits for the blind. However, you will not receive a personal allowance if you earn more than £125,140 a year.

Anyone with only one job or pension and earning less than £100,000 a year (and no taxable benefits such as a company car) has a standard tax code of 1257L.

Your employer then calculates the income tax you must pay on your tax-free allowance.

England and Northern Ireland PAYE Tax Rates 2023/2024:

PAYE tax rates for England and Northern Ireland for the 2023/2024 tax year are as follows:

Basic tax rate:20%, annual income up to £37,700

higher tax rate: 40%, annual income between £37,701 and £125,140

Additional tax rate:45%, annual income in excess of £125,140

Scotland PAYE tax rates 2023/24:

The standard employee personal allowance for tax years 2023 through 2024 is:

• £242 per week
• £1,048 per month
• £12,570 a year

The PAYE tax rates for Scotland for the 2023/2024 tax year are as follows:

The initial tax rate: 19%, doe 2162 GBP

Basic tax rate:20%, vans 2163 GBP tot 13 118 GBP

interim tax rate: 21%, van 13 119 GBP tot 31 092 GBP

higher tax rate: 42%, van 31 093 GBP tot 125 140 GBP

Maximum tax rate:47%, over £125,140

Wales PAYE tax rates 2023/24:

The standard personal allowance for employees in the 2023-2024 tax year in Wales is:

• £242 per week
• £1,048 per month
• £12,570 a year

The PAYE tax rates for Wales for the 2023/2024 tax year are as follows:

Basic tax rate:20%, doe 37 700 GBP

Higher tax rate:40%, van 37 701 GBP tot 125 140 GBP

Additional tax rate:45%, over £125,140

What does my tax code mean?

The letters at the end of your tax code refer to your situation and how it affects the amount you can earn tax-free.

Also, there are additional letters on the front if you live in Scotland (S) or Wales (C), such as S1257L or C0T.

Here is the meaning of the letters:

• L= tusynright to a tax-free personal deduction
• BR= usually with a second job or pension where you are not entitled to a personal allowance because it is assumed that you already use it in your main occupation. You must pay a base tax of 20% on the total amount. Make sure you tell HMRC about your main job.
• D0= As above, but all income is taxed at the higher rate of 40% (average rate of 21% in Scotland)
• D1= As above, but all income is taxed at an additional rate of 45% (41% higher rate in Scotland)
• 0T= you are not entitled to a tax-free personal allowance and your income is taxed according to the tax brackets, for example you earn more than £125,140 (see below)

• SD2= Only used in Scotland, usually for a second job or retirement. You are not entitled to a tax-free personal allowance and all income is taxed at a maximum rate of 46%.
• k= Has a negative personal attribution, for example you pay back tax from the previous year or receive a taxable employee benefit that exceeds (or does not qualify for) personal deductions
• M o N= If you or your spouse/partner received (M) or (N).tax deduction marriage. Non-taxpayers can transfer £1,260 of their personal allowance to a spouse or cohabitant who pays tax at the standard rate.
• New Testament= You do not pay any income tax or pension.
• T= Usually for more complex tax matters to be audited by HMRC. If a number other than zero is followed by a T, you will receive a personal allowance equal to that number.

What about emergency tax codes?

You may see letters and numbers such as W1, M1 or X after your tax code on your pay slip. For example, your tax code might look like this:

• 1257L W1 if paid weekly
• Or 1257L M1 if you earn monthly
• Or you can use X if the payment is not standard

These are all emergency tax codes.

HMRC automatically puts you in an emergency tax code if there is no precise information about the amount of tax you have to pay. For example, if you have just started a new job.

Depending on the information that the Tax and Customs Administration has about you, you pay tax:

• Over personal limit only (£12,570 in 2023/24)
• At a base tax rate of 20% on your entire salary package, if HMRC decides you have no personal allowance (tax code BR)
• 40% higher rate for the entire payment package (VAT code)

Your tax code will probably only be different for a short period of time. This is a temporary measure until HMRC has collected the required information from your employer about how much you earn. HMRC will adjust its code accordingly once it has this information.

If you didn't pay the correct amount of tax due to your change of circumstances, you will remain in the fallback tax code until you pay the correct tax for that year.

Why did they put me on an emergency tax code?

There are many reasons why you may need to pay emergency taxes, including:

• start a new job
• He recently switched from self-employed to employee
• Start or stop receiving benefits from work
• Receive taxable government benefits
• Claiming a marriage deduction or expenses for which you receive tax relief

You may be paying more tax than you need to if you've been issued an emergency tax code that excludes youa personal allowance of £12,570, as BR.

In that case, you lose the tax credit on that amount. In the 2023/24 tax year, you can make additional payments depending on your income:

• 20% Standard Taxpayers (up to £37,277)
• Higher taxpayers 40% (£37,701 to £125,140)

The additional tax rate bracket comes from your previous income of £125,140, ​​after which you pay an additional tax rate of 45%.

However, due to a quirk in the system, anyone earning more than £100,000 will continually start losing their personal limit of £12,570.€1 for every €2earn more than this number.

At £125,140 you lose your tax-free assets completely.

What are the tax codes and policies for students?

If you are a full-time student and work part-time, you may have to payincome taxand social security.

If you earn more than £190 a week you must pay National Insurance. You must also pay income tax if you earn more than £1,042 a month or £12,570 a year, which is your personal allowance.

In general, your employer deducts both income tax and national insurance from your wages using Pay As You Earn (PAYE).

But if you only work during holidays, you are not allowed to pay taxes through PAYE. Your employer will probably have to fill in insteada form called P38.

This only applies if the following conditions are met:

• You are a full-time student in the UK who only works during holidays.
• After the holidays, he returns to a full-time study.
• Below is your total annual incomepersonal authorization

It is your responsibility to take care of the formalities so that you do not pay too much tax.

Why has my tax code changed?

HMRC should adapt your tax code to your situation.

But millions of people find themselves in the wrong tax code every year, which can have a major impact on your finances.

That's why it's important to check you're using the correct code and notify HMRC as soon as possible if you think you're wrong.

You can report a change in your income and circumstances by:

• usingcheck your income taxinternet Service
• Contact HMRCdirect

If you verify online, you need to register for itGovernment Gateway ID.

Why is my tax code incorrect?

There are many reasons why you enter the wrong tax code, resulting in you paying the wrong amount of tax.

These include as:

1. You have started your first job and HMRC has no records of you
2. You recently changed jobs and HMRC may think you have two jobs, so you applied an emergency tax code that removes your personal allowance
3. Switching from self-employed to salaried employment or from part-time to full-time
4. You have more than one income stream or pension, for example you have two jobs
5. Your employer has used the wrong code
6. Receive or stop receiving certain benefits such asthe benefits of your workOtaxable state benefitsor you saymarriage allowance
7. WetExpenses on which you receive a tax credit
8. have recently retired

Do I get a tax refund if my code is incorrect?

If HMRC believes you have overpaid tax due to an incorrect code, they will refund you the tax automatically; you don't have to file a complaint.

HMRC will contact your employer and you will receive the amount due on your next pay slip.

Depending on how long and how much you overpaid, you could get thousands of dollars back.

You can claim it for up to four years, which means you can go back to the 2018/19 tax year.

If you find yourself using the wrong code, you can speed up the process by usingHMRC Online Income Tax Inspectoror by calling 0300 200 3300.

What if I paid less taxes?

In general, in the event of an error, the employee must pay the unpaid tax.

HMRC will usually send you a tax estimate (P800) for the tax year if you have not paid enough tax.

Always check your P800 calculation carefully against your own numbers, such as a P45 or P60, as HMRC may have their numbers wrong.

If you notice that you are paying the wrong amount of tax, please contact HMRC as soon as possible. This should prevent you from getting a higher tax bill later on.

If you owe HMRC tax but can't pay it in a lump sum, there are other options. You can set up a repayment schedule, for example, by spreading the money owed over a period of one year.

HMRC can waive the tax if the underpayment was not your fault. For example, if your employer has not used the PAYE system properly. If you think this is the case, please contact HMRC and ask for a 'supplementary statutory grant' or Form A19.

Please note that it is important for HMRC to keep your personal details up to date at all times. If your situation has changed, go togov.uk.