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Navigating tax codes can feel a bit overwhelming, but understanding them is essential if you're managing your own payroll. Tax codes determine how much tax an employee must pay, and as an employer, you'll need to be familiar with these codes to ensure accurate payroll. In this post, we’ll cover the various UK tax codes, what they mean, and how to use them confidently.
Not Sure of Your Tax Code?
If you or your employees need help finding a tax code, you can easily check it here.
Emergency Tax Codes
What is an Emergency Tax Code?
When you hire a new employee and haven’t yet received their P45, they will be assigned an emergency tax code temporarily. This placeholder tax code is necessary to determine tax status until the proper details are available.
The emergency tax codes for 2023-24 are as follows:
1257L W1
1257L M1
1257L X
The Regular Tax Code
For most people with only one job or pension, the regular tax code is 1257L. This code represents the standard tax-free income amount for the year. In the case of 1257L, employees can earn £12,570 before they begin paying income tax.
What Do the Letters in My Tax Code Mean?
Each letter in a tax code carries a specific meaning related to tax allowances and individual circumstances. Here’s a quick breakdown:
L - Standard tax-free personal allowance
M - Marriage allowance received from a partner (10% of their personal allowance)
N - Marriage allowance transferred to a partner (10% of your personal allowance)
T - Personal Allowance includes additional calculations
0T - No personal allowance (either used up or a new job without detailed tax info)
BR - All income taxed at the basic rate (common for individuals with multiple jobs or pensions)
D0 - All income and pensions taxed at the higher rate (usually multiple jobs or pensions)
D1 - All income taxed at the additional rate (typically for multiple jobs or pensions)
NT - No tax required
S - Scottish tax rate codes
C - Welsh tax rate codes
K - Untaxed income that exceeds the tax-free allowance
Need Help with Payroll?
Managing payroll on your own can be complex. If you’re interested in support, schedule a discovery call with us to explore your options and keep payroll stress-free.
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