Tax Code Letters: What They Mean

The letter in your tax code helps your employer or pension provider to work out how much tax to take from your wages or pension.

Letter What it means
L You’re entitled to the basic tax-free Personal Allowance
P You were born between 6 April 1938 and 5 April 1948 and entitled to your full tax-free Personal Allowance
Y You were born before 6 April 1938 or over and entitled to your full tax-free Personal Allowance
T Your tax code includes other calculations to work out your Personal Allowance (eg it’s been reduced because your income is over specific limits)
0T Your Personal Allowance has been used up, or you’ve started a new job and don’t have a form P45, or you didn’t give your new employer the details they need to give you a tax code
BR All your income from this job or pension is taxed at the 20% basic rate (usually used if you’ve got more than one job or pension or when you start your first job and your employer is waiting for a tax code)
D0 All your income from this job or pension is taxed at the 40% higher rate (usually used if you’ve got more than one job or pension)
D1 All your income from this job or pension is taxed at the 45% additional rate (usually used if you’ve got more than one job or pension)
NT You’re not paying any tax on this income

 

If your tax code has a ‘K’ at the beginning

Tax codes with ‘K’ at the beginning mean that you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance. For most people, this happens when you’re:

  • paying tax you owe from a previous year through your wages or pension
  • getting State benefits that you need to pay tax on (like the State Pension)
  • getting benefits from work that you must pay tax on (like a company car or health insurance)

Your employer or pension provider takes the tax due on the income that hasn’t been taxed from your wages or pension – even if another organisation is paying the untaxed income to you. Employers and pension providers can’t take more than half your pre-tax wages or pension when using a K tax code.

If your tax code has ‘W1’ or ‘M1’ at the end

W1 (week 1) and M1 (month 1) are emergency tax codes. This means your tax is based only on what you are paid in the current pay period, not the whole year. Which code you get depends on whether you are paid weekly or monthly. They appear at the end of your tax code, eg ‘577L W1’ or ‘577L M1’. You will always start a new tax year with a normal tax code, not an emergency one.

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