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As the saying goes, nothing in life is certain except death and taxes. And with that in mind, it’s important to understand where to find your tax code and what it means for your finances.
Where can I find my tax code?
Your tax code is assigned by HMRC (His Majesty’s Revenue and Customs). It tells your employer how much income tax to deduct from your salary before your wages reach your bank account.
Your code can also be found on a P45 form (which is given to you by your employer when you leave your job); a P60 form (an annual tax review from your employer); a tax code notice from HMRC; an update from your pension provider; or you can ask your HR department for it. You can also log in to HMRC’s website to find it, too.
The code is made up of letters and numbers. The numbers should tell you how much tax-free salary you’re allowed to earn each year before being taxed. So, for example, in 2024/2025, the personal allowance is £12,570 so the number part of the tax code for many people is 1257.
Your tax code will also consider other tax allowances and tax relief. If you’re unsure what your tax code means, you can use HMRC’s tax code checker.
Why did my tax code change?
Your tax code could change for a number of different reasons. This might be because your income changes and you move into a different tax bracket, perhaps by taking on a second job, or by going part-time.
Your code may also change if you take advantage of tax allowances and tax relief (such as for uniforms), which means you can reduce the amount of tax you need to pay on the money you earn.
Even if your circumstances and your earnings haven’t changed and you’re still with the same employer, you may find that your tax code changes. This doesn’t mean that it’s wrong. It may just reflect a new level of personal allowance that has been set by the government. These types of changes generally occur at the start of a new tax year (from 6 April) and are nothing to worry about.
I think I’ve got the wrong tax code on my payslip – what should I do?
Lots of people find themselves on the wrong tax code at some point so don’t panic. If you see a change in your code, it’s always good to investigate.
A new code does not, however, always mean the code is wrong. It might just be that your circumstances have changed. Perhaps you’ve changed jobs and were put on an emergency tax code so your employer could pay you. Perhaps you’ve gone through a divorce and can no longer claim marriage allowance, or maybe you’ve taken on a second job.
It’s also useful to know that you may have several different tax codes if you have income from more than one source. Make sure you are comparing the relevant tax code with the relevant source of income.
If you are still convinced that you’re on the wrong tax code (or codes), then you need to report the error to HMRC. You can do this here or alternatively, by calling HMRC on 0300 200 3300.
Don’t think you can pay less tax than is due. If your tax code seems unusually low, you’ll probably be sent a tax code the following year to even things out. HMRC can go back as many as 20 years if it believes a taxpayer has been dishonest.
What is an emergency tax code?
If your tax code includes the letters and numbers W1, M1 or X then you have been given an emergency tax code.
Usually, this is only a temporary measure until you or your employer update HMRC with more information about your pay and other financial details.
This often happens if you start a new job and haven’t yet received your P45 from your previous employer, or when you’ve been self-employed and return to employed status.
It’s really important to check that your tax code is correct as you could end up paying more tax than you need to. If you do, you can claim this back but it’s generally much easier to be on the correct tax code from the get-go.
Tax can undoubtedly be taxing but it doesn’t require a Mensa membership to start understanding the basics and crack the tax code!
