Tax Rebates & Refunds

The various tax codes associated with tax rebates in the United Kingdom

April 12, 2011
Posted in Tax Rebates — Written by Geoffrey

Tax codes are important when it comes to calculating taxes in the United Kingdom. These codes affect the amount of income tax you are liable to pay.

Who issues tax codes?

The tax department in the United Kingdom is responsible for issuing tax codes to employers. This body is known as the HMRC (Her Majesty’s Revenue & Customs). They inform your employer about the code you need to be on, after which the employer can deduct a calculated amount from your yearly pay.

If you need more information on tax codes, refer to the guidelines mentioned below.

The different types of tax codes

The most common example of a tax code would be the 647L. Some other tax codes include 348T, 475V and 474P. It is with the help of these numbers and letters that employers are able to deduct tax from your salary.

What does the letter denote?

The letter is the most important part in a tax code. It denotes the category under which you fall when paying taxes. For instance, the letters P, V and Y are used for old age pensioners while the letter L is used to denote standard working individuals.

The importance of numbers in tax codes

The numbers used in the tax code are used to work out the tax-free allowance of the individual. A tax free allowance is usually the number multiplied by ten plus five. So for 647 it would be (647×10) + 5 = 6475 or £6,475 tax free.

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