UK Tax Codes Explained

In the UK, a tax code is used by an employer to calculate the amount of tax you should pay in a tax year. Normally, your tax will be pre-calculated and come straight out of your salary, unless you are self employed or eligible to pay your own tax. Below are the tax codes explained and a short description of what each code means.

UK Tax Codes and Amounts

Below is each of the UK tax codes explained briefly. If you believe you have the wrong tax code, you should speak to HM Revenue and Customs, as you could be paying too little or too much tax each year.

Usually a tax code is shown with a letter followed by numbers. If you multiply the number of your tax code by ten, you can see the amount of money you can earn in any given year without paying tax.

Tax code letters

  • L: The letter L is reserved for anyone who is eligible for the personal allowance, which is usuaully most employees. It is also used for 'emergency tax code', which is the code used when your tax has not been calculated and the tax office is unsure which tax code to assign to you at the moment.
  • P: This is for people who are between 65 to 74 and eligible for the personal allowance.
  • Y: For people over 75 eligible for the full personal allowance.
  • T: This is for other items that need to be reviewed regarding your tax. For example, an income that results in the reducation or increase of the personal allowance.
  • K: This is when your total allowances are less than your total deducations. If you have company benefits, state benefits or tax to pay from an earlier tax year you will be issued a K code.

Other tax codes

There are also other tax codes, explained below, that may apply to you.

  • BR: This is used when your income is taxed at the base rate, which is currently 20% as of 2013.
  • 0T: This particular code is used when your allowances have been used up or reduced to nil because of the amount you earn. Normally anyone earning over £100,000 will be issued this tax code.
  • D0: This is used when your income is taxed at a much higher rate, 40%, than the base tax rate.
  • NT: This code is only used when no tax is taken from your income or pension.

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