Tax Rebates & Refunds

The smart guide to tax codes

January 16, 2011
Posted in Income Tax — Written by Jennifer

Your employers and pension providers calculate tax deductions by the use of tax codes. If they make a mistake in tax code application, you could end up paying more tax than you should be. A tax code is a combination of letters and numbers.

Multiply the number with ten to get the total income which can be earned before paying the taxes. If there are changes introduced by the Chancellor, then the number’s adjustment is denoted by a letter which will follow the number.

Tax code “L” is applicable for basic personal allowances. It is also used as an emergency tax code. Tax code “P” is applicable to people aged between 65 and 74. They are also eligible for the entire personal allowance. Tax code “Y” is for people over 75 and also offers complete personal allowance. The “0T” tax code denotes that all your allowances are standing at ‘nil’. Tax code “K” is used when the sum allowances are less than the sum of deductions.

“D0” is used for your second job if you earn your income from more than one source. It means that all the income from this job will be charged at the higher rate.

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