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What Are Tax Codes?



Every employee has a tax code, which helps your employer or pension provider determine how much Income Tax is deducted from your pay or pension. HMRC will tell them which code to use.


The tax code is made up of a series of numbers and letters.


The number stands for how much tax fee income you earn. The letter refers to your situation and how it affects your personal allowance.

Letters

What they mean

L

You’re entitled to the standard tax-free Personal Allowance

M

Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance

N

Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner

T

Your tax code includes other calculations to work out your Personal Allowance

OT

Your Personal Allowance has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code

BR

All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)

DO

All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)

D1

All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)

NT

You’re not paying any tax on this income

The most common tax code is 1257l. In this case, you get £12,570 tax-free from any earnings in the tax year. The letter L, means you are entitled to the standard tax-free personal allowance.

If you earn £27,000, and your tax code is 1257l

£12,570 tax fee

£14,430 taxable


For more information on tax codes, contact HMRC or go on the Gov.uk website

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