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Your tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension.

HM Revenue and Customs (HMRC) will tell them which code to use to collect the right tax.

Your tax code will normally start with a number and end with a letter.

1185L is the tax code currently used for most people who have one job or pension.

The numbers in your tax code tell your employer or pension provider how much tax-free income you get in that tax year.

  1. HMRC works out your tax-free Personal Allowance.
  2. Income that you haven’t paid tax on (such as untaxed interest or part-time earnings) and the value of any benefits from your job (such as a company car) are added up.
  3. The income that you haven’t paid tax on is taken away from your Personal Allowance. What’s left is the tax-free income you’re allowed in a tax year.
  4. The last digit in the tax-free income amount is removed.

What the letter means

Letters in your tax code refer to your situation and how it affects your Personal Allowance.

Letter What it means
L You’re entitled to the standard tax-free Personal Allowance
M Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance
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.
T Your tax code includes other calculations to work out your Personal Allowance, for example it’s been reduced because your estimated annual income is more than £100,000
0T Your Personal Allowance has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code
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)
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)
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)
NT You’re not paying any tax on this income

If your tax code has ‘W1’ or ‘M1’ at the end

These are emergency tax codes.

If your tax code has a ‘K’ at the beginning

Tax codes with ‘K’ at the beginning mean you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance.

For most people, this happens when you’re:

  • paying tax you owe from a previous year through your wages or pension
  • getting benefits you need to pay tax on – these can be state benefits or company benefits

Your employer or pension provider takes the tax due on the income that hasn’t been taxed from your wages or pension – even if another organisation is paying the untaxed income to you.

Employers and pension providers can’t take more than half your pre-tax wages or pension when using a K tax code.

Emergency tax codes

The emergency tax codes from 6 April 2018 are:

  • 1185L W1
  • 1185L M1
  • 1185L X

These mean you’ll pay tax on all your income above the basic Personal Allowance.

You may be put on an emergency tax code if you’ve started:

  • a new job
  • working for an employer after being self-employed
  • getting company benefits or the State Pension

Emergency tax codes are temporary. Your employer can help you update your tax code.

You may be put on an emergency tax code if you change jobs. HM Revenue and Customs (HMRC) will correct it automatically after you’ve given your employer details of your previous income or pension.

HMRC will also update your tax code when:

  • you’ve started to get income from an additional job or pension
  • your income has changed
  • you’ve started or stopped getting benefits from your job
  • you get taxable state benefits
  • you claim Marriage Allowance or expenses that you get tax relief on

HMRC will adjust your tax code so you pay the right amount of tax across the year. They’ll write to you or email you when your tax code has been updated.

They will also tell your employer or pension provider that your tax code has changed.

The most common tax code for tax year 2018 to 2019 is 1185L. It’s used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

1185L is an emergency tax code only if followed by ‘W1’, ‘M1’ or ‘X’.

The numbers in an employee’s tax code show how much tax-free income they get in that tax year.

Tax thresholds, rates and codes

The amount of Income Tax you paying depends on your tax code and how much of your taxable income is above your Personal Allowance.

PAYE tax rates and thresholds 2018 to 2019
Employee personal allowance £228 per week
£988 per month
£11,850 per year
Scotland
PAYE tax rates and thresholds 2018 to 2019
Employee personal allowance £228 per week
£988 per month
£11,850 per year

For the existing contractor’s /Agency workers HMRC already issued the following tax codes for the new tax year starting from 6 April 2018.

Tax Code Tax – Free Allowance
460L £4600 to £4609
K293 -£2930 to -£2939
K1641 -£16410 to -£16419
K1546 -£15460 to -£15469
K311 -£3110 to -£3119
K97 -£970 to -£979
584M £5840 to £5849
10T £100 to £109
1085L £10850 to £10859
1164L £11640 to £11649
785L £7850 to £7859
1213L £12130 to £12139
D0 £0
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