Check you're on the right tax code
1. What is my tax code?
Your tax code determines how much tax you pay, taking into account your personal allowance and any taxable benefits you receive.
You can find your tax code on your last P45 or on your PAYE coding notice sent out by HM Revenue & Customs at the start of each tax year.
2. How to work out what it means
Your tax code is made up of several numbers and a letter: for example, 117L. You can calculate the total amount of income you can earn in a year before paying tax simply by multiplying the number by 10.
The letter in your tax code refers to the various allowances or benefits you might be entitled to. For example, L means that you get the basic personal allowance, while P means you are between 65 and 74 and get the full personal allowance.
3. Check you're on the right code
To be sure you're on the right code, you need to check your coding notice – this is normally sent out in January or February by the HMRC. Make sure all the allowances and reliefs you're claiming are shown here, as this will determine your tax code.
You also might have to pay tax on any non-cash benefits from your employer, such as a company car or health insurance.
4. Emergency tax codes
Some people are put on emergency tax codes when they start a new job. While on this code, you'll only receive the basic personal allowance (currently £6,475 for the tax year 2009/10).
Once HMRC has issued you with a tax code, your employer should start to deduct the correct amount of tax, and you should also receive a refund.
5. Wrong code?
If you think you're on the wrong code, contact your tax office. If it is incorrect, you may able to claim up to six years' overpaid tax (dropping to four years in 2012). If you've paid too little, HMRC will take the amount from your allowance for the next tax year.
Make sure you contact HMRC if your circumstances change – for example, if you become self-employed or get married – as this could affect the amount of tax you pay.
Used by an employer or pension provider to calculate the amount of tax to deduct from pay or pension. A tax code is usually made up of several numbers followed by a letter. If you replace the letter in your tax code with ‘9’ you will get the total amount of income you can earn in a year before paying tax, for example 747L would mean a person could earn up to £7,479 before paying tax. The wrong tax code could mean a person ends up paying too much or too little tax.