Tax codes are assigned by the HMRC in view of the incomes and circumstances of individuals eligible for tax payments. Through this article, we will mainly focus on the eligibility criteria

and application of the 1282L tax code. However, we will also discuss how tax codes are calculated, the nature of incomes that are taxed and those that are tax-free.

Why Is My Tax Code 1282L?

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 for 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:

  • you were asked to work from home by your employer and did not opt to do so on your own.
  • you have incurred additional costs as compared to your usual bills due to working from home (you may need to show proof of this)
  • you are not receiving any form of additional work from home support from your employer to cover these costs
  • you are not paying taxes through self-assessment (you need to apply for the tax relief in your tax return)

Claimants are able to receive up to a £125 reduction in their tax bill when they are assigned a 1282L tax code. This estimate is based on the following calculations:

  • Tax relief of 20% on £6 = £1.20 a week = £62 per year for basic-rate taxpayers 
  • Tax relief of 40% on £6 = £2.40 a week = £125 per year for higher-rate taxpayers

It is interesting to note that it is not essential for you to be a full-time employee or work from home on daily basis to make a tax relief claim. Even if you work from home once a week, you can apply for it. 

You may claim-working-from-home-tax-relief as long as you fulfil the eligibility criteria and have evidential documents to support your claim.

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 or 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.

You can check your income tax calculations online through the HM Revenue and Customs website. If you are employed in more than one job, you will have to conduct multiple calculations to have an estimate for income tax deductions for each source of earnings.

How Are Tax Codes Calculated?

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.

If you don’t know your tax code, you can find it through any of the below-listed documents:

  • Payslip
  • P45 form
  • P60
  • PAYE coding notice
  • Pension advice slip
  • HMRC website

Why Can’t I Calculate My Income Tax Online?

In case of any of the following conditions, you will not be able to conduct an online calculation for your income tax calculation:

  • the applicant is not a pay as you earn (PAYE) taxpayer
  • the applicant’s sole source of income is either through self-employment or state benefits
  • the applicant contributes to a pension scheme through their employer
  • the applicant is currently repaying a student loan

How Much Income Tax Do I Have To Pay?

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

If you are self-employed, you are required to file a self-employed tax return to pay your taxes through a self-assessment. 

How Can I Calculate Bonus Tax?

You can calculate the amount of tax that you pay on your salary bonus in the same way that the tax on your monthly income is calculated. Therefore, salaried individuals pay income tax and national insurance on a bonus as they would on a regular income. The reason for this is that when employees receive a bonus in the UK, it is treated in the same way as their income when it comes to tax calculations. 

This means that if you earn £30,000 a year and are classified as a basic rate taxpayer, you will be paying 20% tax and 12% national insurance on incomes in excess of £12,570. If you get a bonus of £3,000, you will still be paying 20% tax and 12% national insurance on this as well.

Sometimes the bonus that you earn may raise the level of your tax bracket which means that incomes (salary plus bonus) below a certain threshold will be taxed at a separate rate, while those in excess of the minimum limit will be taxed at a higher rate.

Which Incomes Are Tax-Free?

Incomes derived from any of the following sources are considered to be tax-free in the UK:

  • Transport costs of an employee’s (and their immediate family) relocation for work in the UK
  • Winnings from games, pool betting, lotteries or competitions with prizes
  • Long service employee awards (certain limitations apply)
  • Individual savings account amounting to £20,000
  • Incomes such as interest or dividends arising from savings accounts 
  • Pensions paid to war widows and dependents
  • Social security and state benefits include maternity allowance, employment and support allowance, attendance allowance, child tax credit and housing benefit. 

Who Collects Tax Revenues In The UK?

The HMRC collects and administers tax collection in the UK. HMRC administers the following central taxes while local governments collect council tax:

  • Income tax
  • Corporation tax
  • Capital gains tax
  • Inheritance tax
  • Insurance premium tax
  • Stamp, land, and petroleum revenue taxes
  • Environmental taxes
  • Climate change and aggregates levy and landfill tax
  • Value-Added Tax
  • Customs duty
  • Excise duties

Conclusion:

The 1282L tax code may be considered as a temporary tax code and will remain applicable until employees are asked to work from home by their employers. It has been widely used throughout the UK since the onset of the covid -19 pandemic to provide tax relief to individuals who have to bear additional expenses such as additional heating, electricity, internet and even work-related phone calls during this time. This and other tax codes are calculated by HMRC keeping in view individuals’ incomes, benefits and allowances. Should there be a change in any circumstance, it will be reflected by a change in one’s tax code.

FAQs: Why Is My Tax Code 1282L?

Why is my tax code 1185L?

The 1185L tax code indicates that the individual has returned to work in the middle of the tax term or after a career break. Due to this reason, their tax-free personal allowance would have been building up, which makes them eligible for a reduced tax rate due to the cumulative nature of this code. 

Why has my tax code been reduced?

Your tax code may be reduced due to a number of reasons including receiving a state pension, owing to tax payments from previous years, receiving rental incomes (which are received directly and may need to be taxed on estimates)

Is the tax code changing in 2021?

Tax codes, eligibility criteria for tax codes as well as tax relief have remained the same during the 2021-2022 tax year. However, deductions have been adjusted to account for inflation. However, due to the work from home nature of certain jobs due to the covid-19 pandemic, certain tax codes were changed by the HMRC and individuals were assigned the 1282L tax code.

Why has HMRC changed my tax code?

The HMRC changed your tax code if there has been a change in your income that affects your deductions or if there has been a change in your working conditions or perhaps you have now retired from the workforce and are now receiving state pension.

Is 1185L an emergency tax code?

Yes, 1185L is an emergency tax code, which also happens to be the basic PAYE tax code for employees. It indicates that the individual has a basic personal allowance of £11,850 for the year.

References:

Working from home? Customers may be eligible to claim tax relief from 2021 to 2022 – GOV.UK

54,800 customers claim tax relief for working from home – GOV.UK

Claim tax relief for your job expenses: Working from home – GOV.UK

Still working from home? Here’s how to apply for tax relief | Evening Standard

How to claim the working from home tax relief – Times Money Mentor

Work-from-home-tax-relief

Estimate your Income Tax for the current year – GOV.UK

Tax-free bonus to employees in the UK – What you need to know

Income tax calculator 2022-23, 2021-22 and 2020-21

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