How to check your tax code, and what do they mean?

, How to check your tax code, and what do they mean?, The Evepost News
, How to check your tax code, and what do they mean?, The Evepost News

Every year more than 11 million people complete their tax return to provide HM Revenue & Customs with information about their income – and every year, many of us struggle with the process.

From remembering your tax code to working out what the letters in it mean, organising your tax affairs can often involve a lot of head-scratching.

However the process is actually quite simple. To help ease the pain ahead of the January 31 deadline, here is a step-by-step guide to checking your tax code. If it looks wrong or your have further queries, contact HMRC.

How to find your tax code

If you have lost your PAYE coding notice, you can locate your tax code in other ways. If you’re unemployed or between jobs, it will be on your P45. 

If you have lost it then give HMRC your National Insurance number and tax reference number and they should be able to tell you. If you use the Government’s online system to file your tax return you can find your PAYE code on there.

Don’t assume that the taxman knows what he is doing

It is tempting to assume that your tax code is accurate. However, HMRC does not wait until you have filed your tax return for the January 31 deadline before sending out your code in February, so they do not have the most recent information. It is up to you to point out any errors they may have made.

Check the basics

The first warning bells on your tax code should come from checking the other information on the coding notice, rather than the code itself. Is your name, address and National Insurance number right? The notice will also state: “You need a tax code so (your employer’s name) can work out how much tax to take off.” 

, How to check your tax code, and what do they mean?, The Evepost News

If you no longer work for that employer, something is wrong.

Look at the letters

The next thing to check is the letter at the front of your tax code. L is used for anyone getting the basic personal allowance. 

T means HMRC needs further information so cannot allocate another code. BR means that you are taxed at the basic-rate, and is typically used for a second job. DO means you are taxed at the higher-rate without allowances (also usually used for a second job or a pension). NT means that no tax is to be taken from your income or pension.

Now add up the numbers

The numbers on your tax code are worked out as follows. Firstly your tax allowances, then income you’ve not paid tax on – part-time earnings or untaxed interest – and any taxable employment benefits are added up. This figure is then taken away from the tax allowance and divided by 10. This is added to the relevant letter and becomes your tax code.