You ought to be aware of the code that applies to you, however, you’d be forgiven if your tax code knowledge is somewhat lacking. If you’re on the wrong one, you could be paying HMRC more than you need to be. On the other hand, you risk being penalised if you’re paying too little.
Read on to find out what your tax code means and make sure it’s correct!
Understanding Tax CodesHMRC uses tax codes to determine the amount of tax you need to pay. The numbers in your code inform your employer and/or pension provider how much tax-free income you’re entitled to during that tax year. The letters in your code, meanwhile, are determined by your circumstances, impacting your Personal Allowance.
You can find your code on your payslip, or on your P45. But what exactly do the letters in each code mean? What’s the difference between T and 0T, or M and M1?
Check out our video below for more information on the most common tax codes and what they mean in practice.
Understanding the Letters in your Tax Code
HMRC uses tax codes to determine the amount of tax you need to pay. Here our video explains exactly what the letters and numbers mean in relation to your tax.
If you think your code is incorrect, or it needs updating, you’ll need to contact HMRC directly.Or, if you’re a contractor or temporary worker and want to know more about how your tax code can affect your earnings, get in touch using the button below.