Tax codes determine the amount of tax to be deducted from your income once your personal allowance has been accounted for. Through this blog post, we aim to analyse the reason why a 1282L tax code is assigned to individuals and the expected amount of tax that will be deducted from your income. Additionally, we will also discuss the implication of some of the common tax codes in the UK along with a basic overview of how tax codes are calculated and what is the concept and amount of personal allowance.
What Does The 1248L Tax Code Mean?
The 1248L tax code means that your tax-free allowance or personal allowance is reduced to £12,480 as compared to the general personal allowance of £12,570 across the UK. The letter “L” at the end of the tax code indicates that you are eligible for a normal tax-free normal personal allowance.
When you are working in the UK, there is a certain amount of your income that remains tax-free as it is considered to be a Personal Allowance. The amount set for Personal Allowance during the 2021-2022 tax period is £12,750.
Generally speaking, incomes above the minimum cap are taxed at an incremental rate of 20 per cent to 45 per cent depending on whether an individual belongs to the basic, higher or additional tax rate band. Below are details of these bands:
- 0 per cent income tax when income is up to £12,570
- 20 per cent income tax when income is between £12,571 and £50,270
- 40 per cent income tax when income is between £50,271 and £150,000
- 45 per cent income tax when income is above £150,001
What Is Personal Allowance?
Your personal allowance is applicable on your combined incomes from different sources. However, for the purpose of tax deduction, your main or primary job, which is also the source of a higher income is considered for Personal Allowance deduction prior to a tax rate is applied.
Since you get Personal Allowance once (it does not apply to each individual source of income), it may be in your own interest to have it applied to your main job and not the second one. However, if someone works two jobs and their cumulative income is less than the Personal Allowance amount of £12,750, they can have it spilt across both incomes. Sometimes a second job may increase your tax bracket which leads to a higher tax deduction on your income with an insignificant impact on your take-home salary.
Your second job is usually considered to be the one that provides a lower income than the first one and there is no consideration for Personal Allowance since it has already been accounted for. The reason is that the HMRC divides your total income by sources to calculate the amount of tax that is due on your cumulative income.
What Are Tax Codes?
Tax codes are a combination of letters and numbers that determine the amount of income tax due on an individual. While the letters indicate your financial position and how it relates to your personal allowance, the numbers tell your employer pr pension provider the amount of tax-free income that you are eligible for in that tax year.
For instance, 1257L (currently the most common 2021-22 tax code in the UK) refers to the new Personal Allowance rate for 2021-22, which is £12,570 and the letter “L” indicates that the individual is entitled to this amount of tax-free income. Any taxes that are to be charged will be above additional amounts beyond this figure.
To confirm your tax code, you can check any of the below-listed documents:
- P45 form
- PAYE coding notice
- Pension advice slip
- HMRC website
How Are Tax Codes Assigned?
Tax codes are a combination of letters and numbers that determine the amount of income tax due on an individual. While the letters indicate your financial position and how it relates to your personal allowance, the numbers tell your employer or pension provider the amount of tax-free income that you are eligible for in that tax year.
The following steps are followed by the authorities while assigning tax codes:
- Step 1: Your tax allowances are calculated. In most cases, this is an individual’s personal allowance added to any other allowances and job expenses.
- Step 2: Your deductions are calculated. These are incomes for which tax has not been paid and may include any part-time work or certain state benefits.
- Step 3: The deductions are subtracted from the tax allowances. The result is your pre-tax income. If this amount equals personal allowance, your income remains tax-free.
What Is A Tax Notification Letter?
A tax notification letter is a notice from the HMRC to inform taxpayers of the tax code that is being assigned to them. This can be issued when your income level reaches above the Personal Allowance amount of £12,750, there is a change in your income level due to an increase or decrease in wages or there is a change in your employment status between being employed and self-employed.
When you receive the tax notification letter, you must make sure that the tax code assigned to you corresponds to your payslip as well as your current circumstances. You must also check whether all allowances, incomes, pensions, restrictions and adjustments are mentioned correctly.
If you find an error in your tax notification letter, you must inform your employer or HMRC.
What Is A Non Cumulative Tax Code?
A non-cumulative tax code is one that only takes into account the period in question for your tax calculation and deduction. This means that depending on whether you receive your pay on a weekly or monthly basis, a non-cumulative tax code will apply for that specific period only and it may change the next time you receive a payslip. 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. In case an individual has paid a sum of income tax before a non-cumulative tax code is applied to their income, the amount cannot be adjusted. Therefore, there are chances that taxpayers will end up overpaying their taxes when a non-cumulative tax code is assigned to them in the middle of a tax term.
What Does Tax Code 1282L Mean?
The 1282L tax code indicates that you have been granted a tax relief by HMRC due to the work from home nature of your employment since the onset of the pandemic.
The reason for this tax relief is to help individuals adjust the increased expenses that they would have incurred as a result of increased heating, internet usage and electricity bills while working from home. However, this relief applies only to individuals who have been asked by their employers to work from home and have not personally chosen to do so.
Benefitting from this tax rebate, nearly four million people have claimed a tax rebate so far in the UK. If you have not applied as yet, the 1282L tax code can also be applied for backdated relief to 2021.
If you have not been assigned a 1282L tax code but you think you may qualify for it due to your working conditions, you can confirm this by checking the eligibility criteria.
What Does Tax Code 1250LX Mean?
The 1250LX tax code on your payslip means that the HMRC is directing your employer to consider your tax deduction as a non-cumulative one. This means that the tax rate applied on your income is only applicable for the period in consideration and the same rate may not be applied for the entire tax year.
The reason for being assigned this unique tax code may be due to the reason that the individual is changing jobs and has been assigned a new tax code in the middle of the tax term. It may also be applicable in cases where self-employed individuals return to salaried jobs and experience a change to their tax code. Or it may be due to the fact that someone is returning to the workplace after a career sabbatical.
The 1250LX tax code is an emergency tax code. This means that it is temporary and can be changed with a change in an individual’s circumstances. Other emergency tax codes include those ending with an M or a W.
What Is A BRX Tax Code?
A BRX tax code is an emergency tax code that indicates that all your incomes must be taxed at the basic rate of 20 per cent 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, you can be assigned a BRX tax code 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
Through this article, we have been able to conclude that the 1248L tax code indicates a reduced amount of personal allowance deduction from your income. This means that while the personal allowance is deducted at £12,750, someone with a 1248L tax code will experience a personal allowance deduction of £12,480.
FAQs: What Does The 1248L Tax Code Mean?
Why has my tax code decreased?
Your tax code may have decreased to increase the taxable amount on your income. The reasons may be tax arrears that you need to pay, an increase in income which will increase your tax or that you have received taxable benefits such as a company car.
Why has my tax code changed this month?
Your tax code may have changed due to a change in your earnings through income or pension.
It may also change if you have started a new job, started to work from home or started benefitting from the Marriage Allowance.
What is the difference between tax codes 1250L and 1257L?
Tax code 1257L has replaced 1250L for the tax term 2022-23; making 1257L the most commonly used tax code in the UK in the current year.
How do I remove my emergency tax code?
If you need to remove your emergency tax code, you should give your P45 to your immediate supervisor at work so that they may apply to the HMRC.