What does my tax code mean?
A tax code tells your employer how much of your pay is free of income tax. Read the number and see what it does to your pay.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
In this room: 3 tasks, 10 questions
- What a tax code is for3 questions
- Spreading the tax-free pay over the year4 questions
- When the code is different3 questions
A tax code tells your employer how much you can earn in the tax year before income tax starts. HMRC works the code out and sends it to your employer.
The number in the code, times 10, is your tax-free pay for the year. The letter tells the payroll more about your situation.
The codes in this room are made up for practice. Maya's code here is 1200L. The real allowance changes from year to year, and your own code is on your payslip.
Answer the questions below
2 more questions follow in this task.
Income tax is taken from every payday. This is called PAYE, which stands for Pay As You Earn.
So the tax-free pay is spread over the year too. Someone paid monthly gets one twelfth of it each month.
Pay above the tax-free amount is called taxable pay. Income tax is a percentage of taxable pay.
| Item | Amount |
|---|---|
| Tax code | 1200L |
| Gross pay | 2,500.00 |
| Income tax | ? |
Answer the questions below
3 more questions follow in this task.
A lower number means less tax-free pay, so more tax. A higher number means less tax.
- BR means none of the pay from this job is tax-free. It is often used for a second job
- A code ending W1, M1 or X is an emergency code. Tax is worked out on that payday alone until HMRC sends the right code
If your code looks wrong, contact HMRC. Your employer cannot change it for you.
Answer the questions below
2 more questions follow in this task.