Check my tax code: Am I paying too much UK tax?
What does my tax code mean?
To know whether you’re on the right tax code, you need to understand what all the numbers and letters mean.
Numbers
The numbers represent your Personal Allowance figure. This is how much you can earn before you need to start paying income tax. For example, someone with a tax code of 12500L can earn £12,500 before having to pay tax.
The Personal Allowance figure usually changes on 6 April, at the start of each financial year, so it’s a good idea to check it every year at this time. For the current tax year, the Personal Allowance is £12,500.
Letters
The letters in your tax code follow the number and all have their own meaning:
| Letters | Tax code meaning | Reasoning |
| BR | Taxed at the Basic Rate of 20%. | 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). |
| D0 | Taxed at the Higher Rate of 40%. | When you have one income stream at a normal tax code and a second salary that pushes you over into the Higher Rate tax band. |
| D1 | Income is taxed at the Additional Rate of 45%. | You earn over £150,000 per year and have a pension or other income source. |
| L | You receive the full Personal Allowance. | Your tax situation is standard. |
| M | You’ve received a transfer of 10% of your partner’s Personal Allowance. | Your partner has not used up their Personal Allowance entitlement. |
| N | You’ve transferred 10% of your Personal Allowance to your partner. | You have not used your full Personal Allowance amount. |
| NT | You’re not paying tax on this income. | |
| 0T | You have been taxed on all your income. | This could be because your Personal Allowance has been used up or if you’ve started a new job and don’t have a P45. |
| S | You pay the Scottish rate of income tax. | You live and work in Scotland. |
| T | Your tax code includes other calculations to work out your Personal Allowance. | Your tax position is “not settled”. |
Tax-free Personal Allowance: How is this calculated
South Africans and some other expats will be accustomed to a fixed tax threshold, but in the UK things work a little differently.
HMRC starts with the basic tax-free allowance of £12,500 and adds or deducts anything that could affect this total. For example, a Personal Savings Allowance and tax-deductible work expenses could increase this amount, while outstanding tax bills and a state pension could decrease it.
Once this has been calculated, your tax code is given to your pension provider and employer to determine how much tax should be deducted from your income.
Why you might be on the wrong tax code
Any situation where you receive more than one source of income could result in the allocation of the incorrect tax code. This could include:
- State and private pension plans
- Having more than one job at the same time
- Short-term contracts
A rise or fall in income could also result in a change of tax code. The most common reason for a change in tax code is when employees receive benefits from their employers.
Claim tax back
Should you find that you’ve paid too much tax because you were on the wrong tax code, all you need to do is claim your tax refund. You can also check if you are due a refund by using a tax return calculator. Claiming back from HMRC can be a simple process with the right help.
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