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SOME Britons may have noticed that their tax code has changed for tax year 2021/22.
It’s worth checking your code and if it’s correct, or you could end up with hundreds of dollars out of your pocket.
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You will have a tax code if you are employed full time or part time, or receive a private pension.
Yet millions of us don’t even bother to check our own for correctness.
The code is a mixture of letters and numbers and is used by your employer to determine how much tax you owe.
They will take the money from your paycheck before it hits your account.
If you enter the wrong tax code, you might see the extra money you overpaid will be refunded to you.
This tax year has seen some of the tax codes change, so it’s a good idea to educate yourself on what they mean.
The most common tax code is 1257L.
We explain what the 1257L tax code means and how to check if you are on the correct tax code to avoid losing hundreds of dollars.
How do I know my tax code?
Britons will have received letters in the post from February telling them what their tax code is for fiscal year 2021/22.
This year’s tax year began on April 6, 2021 and ends on April 5, 2022.
But if you haven’t received a letter, or if you can’t find its location, there are several ways to check what your tax code is for the current tax year.
Your tax code will be displayed on your payslip, usually listed next to your national insurance number.
Your company should provide you with a payslip, so if you’re not sure how to access it, ask your employer for advice.
You can also use the government online tax audit tool to display your tax code.
What does tax code 1257L mean?
Your tax code will be a combination of letters and numbers – here’s what they mean.
There will be three or four digits in your tax code – you need to multiply that number by 10 to see what you can earn tax free per year.
The standard tax code for base rate taxpayers (those earning between £ 12,501 and £ 50,000) has changed for tax year 2021/22.
This is the most common tax code and it is now 1257L, instead of 1250L.
So you have to multiply 1,257 by 10 to find out what you can earn tax-free, which is £ 12,750 per year. This is called your personal allowance.
The letters of your tax code indicate how much you have to pay, and the L means that you are entitled to the basic personal allowance.
You may have a different letter in your tax code – we’ve rounded up the meanings of the other letters below.
What do the letters mean in my tax code?
THE letters of the code on your payslip indicate the amount of tax you owe. Here is our guide to the meaning of each letter:
- L You are entitled to the standard tax-free personal allowance
- M Marriage allowance: you have received a transfer of 10 percent of your partner’s personal allowance
- NOT Marriage allowance: you have transferred 10% of your personal allowance to your partner
- S Your income or pension is taxed at the rates in force in Scotland
- T Your tax code includes other calculations to calculate your personal allowance, for example it has been reduced because your estimated annual income is over £ 100,000
- 0T Your personal allowance has run out, 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 that job or pension is taxed at the base rate (generally used if you have more than one job or pension)
- D0 All your income from that job or pension is taxed at the highest rate (generally used if you have more than one job or pension)
- D1 All your income from that job or pension is taxed at the additional rate (generally used if you have more than one job or pension)
- NT You pay no tax on this income
- Tax codes starting with K means you have income that is not taxed in any other way and is worth more than your tax-free allowance.
You will not have to pay income tax if your annual salary is less than your personal allowance, which is indicated by the letters NT in your tax code.
You can also see NT if you are an independent contractor who has to pay national insurance but not income tax.
How do I know if my tax code is wrong?
You can check if your tax code is correct using HMRC’s online tool Where MoneySavingExpert’s Free Online Tax Calculator.
If it is wrong, contact HMRC to let it know on 0300 200 3300. If it is true, you do not need to do anything.
According to tax investigation insurers PfP, research has found that the best time of day to call is in the morning between 8:30 a.m. and 9:30 a.m. and early for lunch between noon and 12:30 p.m.
The worst times to make contact were between 4:30 p.m. and 5 p.m. – callers had to wait 12 minutes to speak to an agent.
HMRC will write or email you if it changes your tax code – and it will write to your employer about any changes as well.
Then your updated tax code should appear on your next payslip.
How do I know if I am entitled to a tax refund?
If you are eligible for a tax reduction, HMRC will let you know by sending you a letter called P800 or a simple assessment letter.
P800 letters can also tell you that you haven’t paid enough tax, so don’t get too upset when it hits your mailbox.
You won’t get a P800 until after the end of the tax year – the letter usually doesn’t arrive until around September.
This letter will let you know if you can apply online through the government website.
If you make a claim online, the money will be sent to your account in approximately five days.
Or you can wait 45 days and the government will mail you a check.
Here’s how to earn up to £ 43,590 without paying tax.
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