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What is a tax code?

If have been asked for my tax code, but what is it?

Your tax code tells you and your employer/ pension provider how much tax-free pay you’re entitled to.

Assuming you have only one source of income, it’s from employment and there’s nothing unusual about your circumstances or history, you’ll probably have a tax code of 1250L from April 2020. A Scottish taxpayer will have their tax code prefixed with an 'S' or ‘C’ if they are a Welsh taxpayer, so their tax code could be S1250L or C1250L for example. 

The L indicates that you are entitled to the full personal allowance, but there are a variety of different letters you might see.

The personal allowance from 6th April 2020 to 5th April 2021 will be £12,500 but the last digit is dropped when constructing the tax code.

If you have more than one job, you may find that your personal allowance is split across the two jobs or you may have 1250L on one job and BR on the other. HM Revenue and Customs will apply a BR code, when they believe you are a basic rate taxpayer and that your personal allowance is being used in-full against another source of income you have. Any income with a BR code will be taxed at 20%.

Your tax code is important because it will affect how much tax you pay. When HMRC issue you with a tax code, you should make sure you check the calculations. If you think your tax code is wrong, you can contact HMRC to get it changed.

If you have any queries about your tax code or need us to check it, please call 0800 0523 555.

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