Navigating the intricacies of tax codes can be a daunting task for many employees. Your tax code determines how much income tax is deducted from your salary, and even a minor error could leave you paying more than your fair share—or not enough, leading to unexpected tax bills later on. A tax code is used by an employer or pension provider in order to work out how much Income Tax to take from an individual's pay or pension.
The most common one is 1257L, which is based on the Personal Tax Allowance of £12,570 - this is the amount you can earn before you need to pay tax. It is essential to ensure that your tax code is right to avoid overpaying taxes and to potentially claim a refund. Conversely, if you are on a lower tax rate, you may owe money to HMRC.
Workplace expert Sophie Rhone from Digital PR Lab said: "Keeping an eye on your tax code and understanding its implications is essential for managing your finances effectively. "Mistakes can happen, but by staying proactive and informed, you can catch errors early, avoid unexpected bills, and ensure you’re not paying more than you should." How to check your tax code You can find your tax code on your latest payslip or on your P45 if you recently quit your job.
You can also find it on gov.uk/tax-codes but first must register for a government gateway ID. Letters in an employee’s tax code refer to their situation and how it affects their Personal Allowance.
The full list of tax code letters and what they mean can be found on .
