Search


What a tax code means
21/03/2024

The letters in your tax code signify your entitlement (or not) to the annual tax free personal allowance. The tax codes are updated periodically and help employer’s work out how much tax to deduct from an employee’s pay packet. 

The basic personal allowance for the current (and next) tax year is £12,570. The corresponding tax code for an employee entitled to the standard tax-free Personal Allowance 1257L. This is the most common tax code and is used for individuals with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

There are other numbers and letters that can appear in your tax code. For example, there are letters that show where an employee is claiming the marriage allowance (M) or where their income or pension is taxed using the Scottish rates (S). If your tax code numbers are changed this usually, but not always, means your personal allowance has been reduced.

There are also emergency tax codes (W1 or M1) which can be used if a new employee does not have a P45. These codes mean that an employee’s tax calculation is based on what they are paid in the current pay period.

If your tax code has a 'K' at the beginning this means that deductions due for company benefits, state pension or tax owed from previous years are greater than your personal allowance. However, the tax deduction for each pay period can’t be more than half your pre-tax pay or pension.

It is important to check your tax code to ensure the correct information is being used. If you have any queries we can help, or you can check with your employer or HMRC.


Stamford Office

Orion House
Barn Hill
Stamford
Lincolnshire
PE9 2AE

01780 763759
E: This email address is being protected from spambots. You need JavaScript enabled to view it.

Oakham Office

Office Suite 4 Knights Yard
Gaol Street
Oakham 
Rutland 
LE15 6AQ

E: This email address is being protected from spambots. You need JavaScript enabled to view it.

Membership

    

               

                   

Newsletter Sign up

With our newsletter, you automatically receive our latest news by  e-mail and get access to the archive including advanced search options!

Newsletter Sign up  |  Login

Newsfeed Search