The letters that you have in your tax code relate to how much you are entitled to, or not, as an annual tax free personal allowance. Your tax codes are updated annually and they keep employers up to date on how much tax to deduct from your employees pay packets.

To find out more about tax codes, watch our video.

What Tax codes are there and what do they mean?

L – you get the basic rate of personal allowance if you are born after 5 April 1948.

In 2018/2019 the most common tax code is 1185L. The number in your code reflects how much tax free allowance you get, ie 1185L shows a personal allowance of £11,850.

 

OT – with this code you are given no personal allowance. This can happen when you don’t provide your employer with your P45, you don’t give them enough details for them to work out your tax code, or you have used up all of your personal allowance in a previous income.

 

BR or DO – all your pay on this code will be taxed at either the basic rate if you have BR or at the higher rate if you have DO. This may be because all your allowances have been used up which may happen if you have a second job or receive a pension whilst working.

 

D1 – all of your pay will be taxed at the additional rate which is 45%. This will be because you have used all of your allowance already – for instance you may have another job.

 

K – Your total benefits in kind exceed your allowance. For example, if you have a company car with a deemed benefit more than your personal tax free allowance. To get the tax, HMRC add an amount onto your salary before calculating it. You will be given a K code to ensure you pay tax on the excess.

M – this means that you are benefitting from the Marriage Allowance.

 

N – you have elected to use your marriage allowance, transferring 10% of unused personal allowance to your partner or civil partner.

 

NT – No tax is payed on this income.

 

S – You live in Scotland and you pay the Scottish Rate of Income Tax

 

T – this one is used when the tax office needs to review your tax code. For example, if your tax affairs are complex, or your estimated income is more than £100,000, which could affect your personal allowance.

 

W1 or M1 – These are emergency tax codes, standing for one week or one month depending on whether you are paid weekly or monthly. This indicates that you are not being taxed cumulatively, but just on the amount that you have earned in that particular pay slip.

 

Checking your Tax Code

It is always important to check your tax code to ensure the correct information is being used as HMRC can occasionally get it wrong.

If you have been on the wrong code then you can notify HMRC and they will amend it for you. You will be refunded if you have been over paying or may need to pay more if you have been underpaying.

 

I hope you found this useful. If you would like to know more, please get in touch.