Finance > Tax (employee Focus)
What Are Tax Codes?
All full or part-time employees should have a tax code. Your employer uses tax codes to calculate the tax and national insurance contributions (NICs) that is due each month. Many of you will pay tax through the Pay As You Earn (PAYE) system.
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Tax Codes
HMRC are responsible for issuing your tax code and will inform your employer. If you have more than one employer or are employed whilst also drawing a pension, you will have multiple tax codes.
The code itself is made up of letters and numbers. These represent the personal allowance that you are entitled to, as well as whether your current situation impacts that allowance. For example, your code can indicate whether additional tax is to be collected if you have underpaid in previous years or have additional income.
The standard tax code for the 2022/23 year is 1257L, meaning you are entitled to the full personal allowance of £12,570
The numbers: Indicate your personal allowance for the year, i.e. the amount you can earn before tax starts being deducted. Take the number and add a zero to get the amount.
1257 = £12,570
The Letters: Letters in your tax code refer to your situation and how it affects your personal allowance. The most common letter is L.
L = entitled to the standard personal allowance.
For a full list of what the letters mean, visit Gov.uk.
What Is an Emergency Tax Code?
You will receive an emergency tax code if HMRC don’t have enough details to decide how much tax you should be paying. This commonly occurs in the following circumstances:
- You’ve started a new job
Make sure you give your new employer your For P45 from your previous role or provide sufficient details
- You’ve moved from being self-employed to working for an employer
Your new employer will ask for details using a ‘starter checklist’
Emergency tax codes are only temporary and will be updated by HMRC upon receiving the correct or sufficient details from you or your employer.
How to Check My Tax Code?
Step 1: Find your tax code
In order to check your tax code, you firstly need to establish what it is. You can find your tax code on any of the following:
- Payslips – Monthly/weekly
- P60 – An annual tax summary provided by your employer
- P45 – Document you receive when you stop working for an employer
- Online – Check your tax code online with HMRC
Step 2: Check the numbers and letters
Once you have your code, check the numbers and letters are correct by doing the following:
- Numbers
Your personal allowance less any deductions = number in your tax code (don’t forget to take off a zero!).
Common deductions include: vehicle use, medical insurance, travel costs and underpaid tax from a previous year.
- Letters
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