What Is The List Of Tax Codes And What Do They Mean?
If you are keen to learn about tax codes that are applied under the UK taxation system and what they mean, you will find detailed guidance in the following blog post.
What Is The List Of Tax Codes And What Do They Mean?
Below is a comprehensive list of Tax Codes under the British taxation system with a brief description of each one to help you understand what they mean:
|L||The standard rate of tax-free Personal Allowance applies (this amounts to £12,570 in the 2022/2023 tax term)|
|M||10% of your partner’s tax free Personal Allowance is being transferred to you|
|N||You have transferred 10% of your tax free Personal Allowance to your partner|
|T||Other calcualtions are included to calculate your Personal Allowance|
|0T||You have used your annual tax-free Personal Allowance or your employer does not have complete details to assign a tax code|
|BR||The basic rate of 20% is applied to your income (used in cases of more than one job)|
|D0||The higher rate of 40% is applied to your income (used in cases of more than one job)|
|D1||The additional rate of 45% is applied to your income (used in cases of more than one job)|
|NT||There is no income tax due on your earnings|
|W1, M1 or X||This is an emergency tax code applied on a temporary basis and can change during the tax term|
|K||Your income is worth more than your tax free Personal Allowance|
These tax codes can be found through:
- a “Tax Code Notice” or “Tax Notification Letter” from HMRC
- your payslip, P45 form or P60 form
- the HMRC app
Alternatively, you can also access your Personal Tax Account online to check your tax code.
What Are The List Of Tax Codes In Scotland And What Do They Mean?
If you live in Scotland, your tax codes will read as follows:
- when your income or pension is taxed using the rates in Scotland your tax code will be S
- for individuals whose Personal Allowance has been used up, or those who have started a new job and their employer does not have all the details required to assign a tax code, their tax code will S0
- if your entire income or pension is taxed at the basic rate your tax code will be SBR
- if your entire income or pension is taxed at the intermediate rate your tax code will be SD0
- if your entire income or pension is taxed at the higher rate your tax code will be SD1
- if your entire income or pension is taxed at the top rate your tax code will be SD2
What Are The List Of Tax Codes In Wales And What Do They Mean?
If you live in Wales, your tax codes will be assigned from the following list:
- your tax code will be C if your income or pension is taxed using the basic rates
- your tax code will be C0T if your Personal Allowance is used up, or you’ve started a new job and your employer does not have the necessary details required to give you a tax code
- your tax code will be CBR if your entire earnings are to be taxed at the basic rate
- your tax code will be CD0 if your entire earnings are taxed at the higher rate
- your tax code will be CD1if your entire earnings are taxed at the additional rate
What Is The Meaning Of An Emergency Tax Code?
An emergency tax code means that the tax code applies to a specific period during the year and not the entire tax term. Emergency codes are temporary and unlike regular tax codes, they can change in the middle of the tax term if there is a change in circumstance or income(s) of the individual to that they are being applied.
An emergency tax code such as OTW1 or OTM1 can apply in the following situations:
- the individual is changing jobs and has been assigned a new tax code in the middle of the tax term
- the individual was previously self-employed and is returning to a salaried job
- the individual is returning to the workplace after a career sabbatical
The W1 extension indicates that the tax code is being applied for a particular week in question (this applies in the case of weekly wages which can change over time). Similarly, the M1 extension indicates that the tax code only applies to the month in which is being assigned and not the entire tax term.
What Is The Meaning Of A Basic Rate Tax Code?
The basic rate tax code is also an emergency tax code and is read as BRX. if you see a basic rate tax code on your payslip it means that all your earnings must be taxed at the basic rate of 20% without taking into consideration your tax-free Personal Allowance.
It is usually applied when the HMRC and your employer do not have complete details regarding your employment and/or income details and the BRX tax code is assigned to you while the documentation is complete and a permanent tax code can be assigned to you.
In addition to this, a BRX tax code is assigned if:
- an individual has not provided their employer with a complete P45 form or a P47
- someone is being transferred from being self-employed to a PAYE employee
- you are receiving an additional income through a second job or a pension
What Is The Meaning Of A Non-Cumulative Tax Code?
A non-cumulative tax code means that the HMRC is only taking into account the period in question for your tax calculation and deduction and not the entire tax term. This is usually a temporary or emergency tax code which will change before the end of the tax term when a permanent tax code is assigned to you.
A non-cumulative tax code indicates that your income will be taxed depending on whether you receive your pay on a weekly or monthly basis. In the case of weekly pay, you will find a W1 extension at the end of your tax code; while for a monthly salary, your tax code will end with an M1 extension.
This means that the income tax rate is applied to the entire sum of income(s) of an individual without the deduction of Personal Allowance from their earnings.
What Is The Meaning Of A Cumulative Tax Code?
A cumulative tax code is the most common tax code that applies in simple cases of tax codes assigned to earnings. It is calculated on the basis of your year-to-date tax payments.
This means that the cumulative tax code takes into account your tax payments made during a tax year while keeping an account of the amount of tax-free allowance that you have used during the same time. This means that any unused personal allowance can be passed on to future weeks.
The most commonly used cumulative tax code is 1257L. It indicates your tax-free personal allowance of 12,570 and that income earned above this amount will be subject to a tax deduction.
The above discussion provides a detailed guideline on the different tax codes applied across England, Scotland and Wales with an explanation that can help readers in differentiating between key terms such as emergency tax codes, basic rate tax codes, cumulative and non-cumulative tax codes.