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 income, it’s from employment and there’s nothing unusual about your circumstances or history, you’ll probably have a tax code from April 2018 of 1185L. A Scottish taxpayer will have their tax code prefixed with an 'S', so their tax code could be S1185L 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 2018 to 5th April 2019 will be £11,850 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 1185L on one job and then BR on the other. HMRC will apply a BR code, when they believe you are a basic rate taxpayer and that your personal allowance is being used against another source of income you have. Any income with a BR code will be taxed at 20%.
Your tax code is really 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.
By Jo Nockels
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