Date Published: July 5th, 2019

Check if Your Tax Code is Correct

A tax code is used by a pension provider or employer to compute the amount of income tax payable on an employee’s pension or pay. An individual can check his/her income tax online to seek information about the tax code – what is the tax code, has the tax code changed, how is the tax code worked out, and the amount of tax payable. A tax code, typically, starts with a number and finishes with a letter/alphabet. For most individuals with one job or pension, 1250L is the tax code used at present.

Working out the tax code numbers

The numbers in an employee’s tax code communicate to a pension provider or employer the amount of tax-free earnings an individual can receive in a tax year. The below mentioned steps can help to understand how the tax code numbers work:

  • Her Majesty’s Revenue and Customs (HMRC) computes the tax-free Personal Allowance.
  • The authority will add up the income on which tax has not been paid (such as part-time earnings or untaxed interest) and the worth of any reimbursements received from the job (for instance a company car).
  • The income on which tax has not been paid is subtracted from the Personal Allowance. The remaining amount constitutes the tax-free income an employee is permitted in a given tax year.
  • The digit at the end of a tax-free income amount is removed.

Therefore, the final numbers in a wage earner’s tax code confirm the tax-free income he/she will receive in that tax year. An employee can, typically, multiply the tax code number by 10 to arrive at the overall amount of earnings they can receive before being taxed. For instance, a wage earner with tax code 1250L can make £12,500 before being taxed. If he/she earns £27,000 for each year, the taxable income will be £27,000 – £12,500 = £14,500

Letters in wage earner’s tax code and their meaning

Letters in a wage earner’s tax code speaks of their situation and how it has an impact their Personal Allowance. The below mentioned table discusses about the tax code, how the tax is subtracted, and when the tax code is typically used –

Code How tax is deducted When this code is usually used
0T Applicable for all earnings– no Personal Allowance here This tax code is used when an employee does not provide an employer with a P45 or sufficient information to compute their tax code, or when an employee’s Personal Allowance has been completely used
BR From all earnings at the basic rate For a pension or a subsequent employment
C0T From all earnings– no Personal Allowance here When a wage earner, whose home-base is in Wales, hasn’t provider an employer with a P45 or sufficient information to compute their tax code, or when an employee’s Personal Allowance has been completely used
L At basic, higher and supplementary rates subject to the sum of taxable earnings For a member of the staff who is eligible for standard tax-free Personal Allowance
M At basic, higher and supplementary rates subject to the sum of taxable earnings For a member of the staff whose civil partner or spouse has moved some amount of their Personal Allowance

Marriage Allowance: if an employee has received a transfer of 10% of their civil partner’s or spouse’s Personal Allowance

N At basic, higher and supplementary rates subject to the sum of taxable earnings For a member of the staff who has moved some amount of their Personal Allowance to their civil partner or spouse

Marriage Allowance: if an employee has transferred 10% of their Personal Allowance to their civil partner’s or spouse

D0 From all earnings at the higher rate For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at a higher rate
D1 From all earnings at the additional rate For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at an additional rate
CBR From all earnings at the basic rate in Wales For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at a basic rate in Wales
CD0 From all earnings at the higher rate in Wales For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at a higher rate in Wales
CD1 From all earnings at the supplementary rate in Wales For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at an additional rate in Wales
C From earnings in Welsh tax bands Applicable for a wage earner whose chief home-base is Wales
NT No tax is subtracted Very explicit cases, for instance musicians who are considered as self-employed and not subject to pay-as-you-earn
S From earnings in the Scottish tax bands Applicable for a wage earner whose chief home-base is Scotland
S0T From all income – there is no Personal Allowance When a wage earner, whose home-base is Scotland, hasn’t provider an employer with a P45 or sufficient information to compute their tax code, or when an employee’s Personal Allowance has been completely used
SBR From all income at the basic rate in Scotland For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at a basic rate in Scotland
SD0 From all income at the intermediate rate in Scotland For a pension or a subsequent employment – all earnings in this occupation or pension is taxed at an intermediate rate in Scotland
SD1 From all income at the higher rate in Scotland For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at a higher rate in Scotland
SD2 From all income at the top rate in Scotland For a pension or a subsequent employment – all earnings from this occupation or pension is taxed at a top rate in Scotland
T At basic, higher and supplementary rates subject to the sum of taxable earnings When HMRC needs to evaluate specific items with the employee. The tax code comprises additional computation to calculate the Personal Allowance, for instance, it’s been decreased because an employee’s projected twelve-monthly income is in excess of £100,000

Emergency Tax Codes

Emergency tax codes are provisional, and if an employee is on an emergency tax code then his/her payslip will reflect the following –

  • 1250 M1
  • 1250 W1
  • 1250 X

Here, M1 (month 1) and W1 (week 1) are emergency tax codes and M1 and W1 are positioned at the end of a wage earner’s tax code, for instance ‘577L M1’ or ‘577L W1’. Compute a wage earner’s tax only for the present pay period, not the complete year. Also, the alphabet K is used in a wage earner’s tax code when deductions due for state pension, company benefits, or tax owed from prior years is in excess of their Personal Allowance. A wage earner with tax code K475 and a pay of £27,000 will have taxable pay equivalent to £31,750 (£27,000 plus £4,750).

Updating the Tax code

If a wage earner changes a job, he/she can put on an emergency tax code. HMRC will automatically correct it after a wage earner has given the employer particulars of his/her previous earnings or pension. HMRC will update the tax code when:

  • An employee starts to receive additional income from another job or pension
  • An employee’s income has altered
  • An employee starts or stops receiving benefits from their job
  • An employee receives taxable state benefits
  • An employee claims Marriage Allowance and gets tax relief on

Once the tax code has been changed, HMRC will amend the tax code so that an employee pays the correct amount of tax all-through the year. Usually, HMRC will write an email informing about the change in the tax code. Also, the pension provider or employer will be informed about the tax code change. After updating the tax code, the payslip should reflect the new tax code, and alterations if incorrect tax was being paid. In case an employee thinks that his/her tax code is incorrect, he/she can contact HMRC:

An employee can use Twitter (handle: @HMRCcustomers) to get tax code assistance from HMRC. In addition, through a web chat, advice-givers can provide information on pay-as-you-earn (PAYE) income tax. Furthermore, in order to contact HMRC over the phone, contact details are as follows:

Text-phone number: 0300 200 3319
Telephone number: 0300 200 3310
Outside the United Kingdom: +44 161 931 9070

The help desk can be contacted in the below mentioned time slots:

From Monday to Friday in between 8 AM and 8 PM
Contact on a Saturday between 8 AM and 4 PM
Contact on a Sunday between 9 AM and 5 PM

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