If you work for any company in the UK, you should see a tax code on your wage slip every month – unless you’re self-employed, that is. This tax code tells you how much income tax you pay.
You might not bother checking your tax code but with the new 2017/18 tax year due to start on 6 April 2017, it’s likely this code will change. This means the amount of Income Tax you pay could change too.
Worried about how this will affect the money in your pocket? We’ll take you through the different UK tax codes for 2017/18 – and what they mean for you.
The most common tax codes
If you only have one job and you earn less than £32,001 a year, your tax code for the 2017/18 tax year should be 1150L. This will be the tax code for the majority of employees who work one job with a fixed number of hours.
The 1150L tax code means you have a tax-free Personal Allowance of £11,500. This is how much you can earn this tax year before you have to start paying any Income Tax. You’ll pay Income Tax at 20% for everything you earn over £11,500.
There’s no difference in the tax code you’ll see if you’re an older worker anymore. No matter what your age, if you earn under £32,001 a year from one job, you should still see the 1150L tax code.
If you’ve changed your job in the last couple of months, you could see an emergency tax code. These are 1150L M1 or 1150L W1, depending on whether you get your wages monthly or weekly.
You don’t need to worry if you’re paying emergency tax – this just means that HMRC is calculating the Income Tax you need to pay every month or every week. This means you might overpay tax.
You should end up on the right tax code after you’ve been at your new job for a while and you should get a tax refund if you’ve overpaid anything. If this hasn’t happened and you’ve been in your job for more than three months, get in touch with HMRC to ask them to update your tax code.
The other major tax codes
If you’re an employee in Scotland, the main tax code is S1150L. This will be the tax code you’ll see if you just work one job and you get the standard tax-free Personal Allowance of £11,500.
Work more than one job? Your tax code for any jobs other than your main job will be BR. This means that you’ll pay Income Tax at 20% for everything you earn from this job – there’s no tax-free Personal Allowance.
This is how it should be if you earn more than £11,500 a year from your main job. But if you earn less than this, contact HMRC and ask them to split your Personal Allowance between your jobs.
You could get the Marriage Allowance if you’re in a relationship and you or your partner earns less than £11,500 a year. This is when you ‘share’ your unused Personal Allowance with the higher earner so they don’t have to pay as much Income Tax.
If you do this, your tax code will end with M or N, depending on whether you’re claiming the Marriage Allowance or you’re giving up some of your Personal Allowance.
Other tax codes
It’s possible your tax code could start with the letter K, meaning you have a negative tax-free Personal Allowance. This is very rare – it will only happen if you didn’t pay enough Income Tax last year or if you get any benefits from work you need to pay tax on, like a company car.
With a K tax code, the numbers in your code show how much extra Income Tax you need to pay. This shouldn’t ever be more than 50% of your gross pay for that month or week. And when you’ve paid off the Income Tax you owe, HMRC should update your tax code.
You could also see the NT tax code – this means you don’t pay any income tax. This will only happen if you went bankrupt in the last year, you work certain jobs or you live abroad but work in the UK.
If you earn between £32,001 and £150,000 and you work more than one job, your tax code for any second job will be D0. This means that you’ll pay Income Tax at 40% for everything you earn from your second job.
And if you earn over 150,001 and have a second job, your tax code for the second job will be D1. This means you’ll pay the additional rate of Income Tax at 45% for everything you earn from this job.