Tax Rebates & Refunds

Different tax codes and their meaning

July 25, 2011
Posted in Income Tax — Written by Jennifer

When living and earning in the UK, you are expected to pay income tax every year. Every month when you get your salary, the employer will have deducted tax from it. The amount of tax that is deducted from your wages depends on the tax code.

The tax code is mostly determined by your deductions, allowances and benefits like a company car. However, if your employer is unaware of your tax code, you might end up paying excess tax on an emergency tax code. Your tax code is made up of a letter and some numbers. Taking the number from your tax code and multiplying it by 10 will give you the amount of your tax free allowance. This is the actual amount that you earn prior to paying the tax.

What does the letter on your tax code indicate?

The letters in your tax code determines how your allowances are to be adjusted after any changes made by the Inland Revenue.

L – This letter is specifically for people who are eligible to get a basic personal allowance.

P – The letter P in the tax code is for individuals aged between 65-74 years. They are also entitled to receive a full personal allowance.

Y – This letter is for people aged 75 or older.

T – The letter T in your tax code might be denoted if the Inland Revenue feels the need to review something in your tax code. For instance, your income-related pay is over the personal allowance.

Sometimes you may also be given other tax codes like NT, D0 or BR. This is possible if your employer has not given a P45 to you or when you have more than one job at any given time.

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