Tax Rebates & Refunds

The quick reference guide for common tax codes

February 12, 2011
Posted in Income Tax — Written by Jennifer

Tax codes are made of a combination of numbers and letters. Tax codes are used by employers and pension providers for calculation of tax deductions from your income. They determine the amount of tax exempt income you are allowed to have per year. If there is a mistake in your tax code then you will either pay less tax or more than you are supposed to.

The tax code method

In some cases, your tax code may have a letter next to the number. If you multiply the number by ten, you will arrive at the total income allowed before tax is deducted. The number is followed by a letter to denote adjustments.

Common tax codes you may come across

Tax code L is attached for indication of basic personal allowance. It is one of the emergency tax codes. The P tax code is especially for individuals aged between 65 and 74. These individuals are eligible for full personal allowances. If your tax code is T then it means that your income has been taxed at relevant rates because your allowances sum up to ‘nil’.

The tax code Y is for individuals over the age of 75 and they are eligible for a complete personal allowance. If your sum allowance is less than your sum deductions then the tax code ‘K’ is applicable.

Some rare tax codes

You may come across the tax code D0, which is used for individuals with more than one source of income.

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