subject: Understanding The Tax Codes [print this page] Now, the first thing that you need to know is the fact that the tax code is what your employer and even your pension planner use to determine the amount of taxes that you are supposed to pay. The tax code that you have will depend on your unique circumstances, and will determine the amount of money that you will receive, and also the amount of personal allowances that you will be allowed.
Tax Code Followed By Letters
Now, for many people in the UK, you will find that many of them have got tax codes that are followed by a single letter. In this article, we are going to start by looking at this category of codes, before we look at the others that we have in the system. The first part of the code, the numbers, determines what your allowance is. You can determine the tax free allowance by multiplying the figure by ten and thereby getting a rough estimate of how much you are allowed. For example, if you have a tax code with the digits 747, you will multiply this number by 10 you will get 7,470. This is the approximate amount of your tax free allowance. The letter part will determine the class under which you will fall.
Now, the L after the 747 is one that means that you are only entitled to the basic pay. This code also refers to an emergency tax code which is applicable when the HMRC don't have much information about the taxpayer. On the other hand, we have category P which refers to a different group of taxpayers. Taxpayers who are under category P are those that are between 65 years of age and 74 years of age. For people who are above the age of 75, the code is none other than Y. You will have T as your tax code letter if at all you have some extra income that needs to be evaluated so as to determine where again you can be placed.
Apart from the typical case where the number is followed by a letter, there is the case where you have two letters following each other, and in some cases you have the letter D followed by a number.
At the end of the day, it is extremely important that you are fully aware of what your tax code means. It will not only help you calculate your taxes properly, but it will also make it possible for you to correct any errors in your classification.
