A quick two-minute check could reveal you’ve been overpaying tax for months
Her Majesty’s Revenue and Customs (HMRC) is the government department responsible for tax, payments and customs in the UK. It collects the money that funds public services, and what you pay depends on your income and personal circumstances.
Your tax code is the reference HMRC gives your employer or pension provider so they know how much Income Tax to take from your wages or pension. You’ll usually have a different code for each job or pension, so it’s possible to have more than one tax code at the same time.
A change of job isn’t the only reason your code might be updated. It can also change if you take on another job or start a new pension, if the amount you receive from the State Pension is adjusted, or if HMRC needs to recover something you owe, such as a Winter Fuel Payment repayment.
What is my tax code?
Not everyone will have a tax code – for example, if you’re fully self-employed, unemployed, or only receive the State Pension. You can find your tax code:
If you look up your tax code online or in the HMRC app, you can also see your tax codes from previous years and switch to paperless notifications. That way, HMRC will email you whenever your tax code changes.
Why has my tax code changed?
HMRC can change your tax code for a number of reasons, usually because your income or circumstances have changed and the amount of tax you need to pay has been adjusted. If your code is updated, HMRC will normally get in touch to explain how they worked out the new one.
For example, it could change because:
- You claim Marriage Allowance
- You claim expenses that you get tax relief on
- You’re paying the High Income Child Benefit Charge through your wages or pension
- You’ve been on the wrong tax code and owe tax
- You start to get income from an additional job or pension
- Your weekly State Pension amount changes
- Your employer tells HMRC you have started or stopped getting benefits from your job
- The interest on your savings is more than your Personal Savings Allowance
- You get taxable state benefits
- You need to pay back the Winter Fuel Payment or Pension Age Winter Heating Payment
- You start a new job
If you start a new job and your employer doesn’t yet have your previous pay details, you could be placed on an emergency tax code. If your tax code has changed, you can use HMRC’s ‘Check your Income Tax’ online service to see why.
You could be on the wrong tax code, says Money Saving Expert
Money Saving Expert (MSE), founded by Martin Lewis, is urging people to act fast if needed, explaning that some are more likely to be on the wrong tax code. The team says anyone can be affected, but advises checking sooner rather than later if any of the following has happened to you recently:
- You’ve started your first job – If you start your first job partway through the tax year, you can easily end up on an emergency tax code. Don’t assume your first few payslips are correct.
- You have more than one pension, have recently retired or started to receive a pension while still working – If you have income from more than one pension, retired in the past couple of years, or have recently started receiving the State Pension, you may have been taxed incorrectly.
- You have more than one income – If you have more than one source of income, such as a second job, you may find you’ve been taxed wrongly on some of your earnings.
- You receive employee benefits – If part of your pay includes company benefits like a company car, a healthcare cash plan or medical insurance, you could be paying the wrong amount of tax.
- You changed jobs – HMRC can mistakenly think you have two jobs if your old employer hasn’t told it you’ve left.
What does my tax code mean?
Tax codes use numbers and letters. For most people with one job or pension, the standard tax code is 1257L.
You can enter your code in the check what your tax code means tool here. This explains what the numbers and letters mean, how much tax you’ll pay, and whether you need to do anything.
The numbers in your tax code tell your employer or pension provider how much tax-free pay you can receive from them during the tax year.
To work out your individual number, HMRC starts with your tax-free Personal Allowance and takes off any:
- Income you have not paid tax on (such as untaxed interest or part-time earnings)
- Other deductions in your tax code (such as company benefits or the High Income Child Benefit Charge)
They then replace the final digit with a letter. However, if you have a K in your tax code the calculation is different.
HMRC’s example explains: “You’re entitled to the standard tax-free Personal Allowance of £12,570, but you also get medical insurance from your employer. As this is a company benefit, it lowers your Personal Allowance and changes your tax code.
“The medical insurance benefit of £1,570 is taken away from your Personal Allowance, leaving you with a tax-free amount of £11,000. This would mean your tax code is 1100L.”
Letters in your tax code refer to your situation, and how it affects your tax-free Personal Allowance and the rates of tax you pay.
- NONCUM – You’re on an emergency tax code
- M – Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance
- C – Your income or pension is taxed using the rates in Wales
- D0 – All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
- C0T – Your Personal Allowance (Wales) has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code
- W – You’re on an emergency tax code
- T – Your tax code includes other calculations to work out your Personal Allowance
- L – You’re entitled to the standard tax-free Personal Allowance
- SD2 – All your income from this job or pension is taxed at the advanced rate in Scotland (usually used if you’ve got more than one job or pension)
- NT – You’re not paying any tax on this income
- X – You’re on an emergency tax code
- N – Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner
- S – Your income or pension is taxed using the rates in Scotland
- BR – All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
- SD1 – All your income from this job or pension is taxed at the higher rate in Scotland (usually used if you’ve got more than one job or pension)
- CD1 – All your income from this job or pension is taxed at the additional rate in Wales (usually used if you’ve got more than one job or pension)
- CD0 – All your income from this job or pension is taxed at the higher rate in Wales (usually used if you’ve got more than one job or pension)
- D1 – All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)
- SBR – All your income from this job or pension is taxed at the basic rate in Scotland (usually used if you’ve got more than one job or pension)
- CBR – All your income from this job or pension is taxed at the basic rate in Wales (usually used if you’ve got more than one job or pension)
- S0T – Your Personal Allowance (Scotland) has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code
- M1 – You’re on an emergency tax code
- SD3 – All your income from this job or pension is taxed at the top rate in Scotland (usually used if you’ve got more than one job or pension)
- K – You have income that you are not paying tax on which is more than your Personal Allowance – find out about a K in your tax code
- 0T – Your Personal Allowance has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code
What are HMRC responsible for?
Established by Act of Parliament in 2005, HMRC is responsible for:
- customs duty
- enforcement of the National Minimum Wage
- recovery of Student Loan repayments
- anti-money laundering supervision
- property valuations that support taxation and benefits
- Child Benefit
- Income Tax, Corporation Tax, Capital Gains Tax, Inheritance Tax, Insurance Premium Tax, Stamp, Land and Petroleum Revenue Taxes
- excise duties
- trade statistics
- National Insurance
- tax credits
- environmental taxes
- climate change and aggregates levy and landfill tax
- Value Added Tax (VAT), including import VAT
