A tax code is important and should always be kept under check to ensure it is right, and you are not overpaying, or underpaying tax to HMRC. It can vary if you have different taxed income sources such as pensions or jobs.
If you had a tax code change, you should have received a letter in your postal address registered at HMRC, but if your communications delivery preference is via email or SMS, then login into your HMRC account and read more under the ‘Tax Code’ section. Where else can I find my tax code? It can also be seen on your monthly payslips, P60, P45 (in case you switched jobs).
The letters in your tax code refer to your specific situation and how they affect your Tax Personal Allowance. Each letter has a different meaning:
- L – You are entitled to the standard tax-free Personal Allowance.
- M – You’ve received a transfer of 10% of your partner’s Personal Allowance.
- N – You’ve transferred 10% of your Personal Allowance to your partner.
- T – Your tax code includes other calculations to work out your Personal Allowance.
- M1 (or X) – They are emergency tax codes.
- OT – Your Personal Allowance has been used up, or you have switched jobs and your employer does not have details to give you a tax code.
- BR – You are paying tax at the basic rate of 20% on this income.
- DO – You are paying the higher tax rate of 40% on this income.
- D1 – You are paying the top tax rate of 45% on this income.
- NT – You are not paying any tax on this income.
- S – Your income or pension is taxed using rates in Scotland (The S refers to Scottish tax codes)
- C – Your income or pension is taxed using rates in Wales (The C refers to Welsh tax codes)
- K – Means your income is not being taxed another way and it is worth more than your tax-free allowance.
If you are unsure about your tax code, or if you have paid the right amount of tax, we would be happy to help – Find your local AIMS Accountant to discuss further.
We are Business Accountants for Business People.