Tax Codes Explained: What Does The T Mean On My Tax Code?
You know those little letters and numbers on your payslip next to 'tax code'? What does the T mean on my tax code?
If you're like most people, tax codes seem utterly confusing, and you just accept whatever your employer has listed. However, understanding your tax code can help ensure you're paying the right amount and avoid issues down the road.
Ready to decode your tax code and understand your payslip better? Let's dive in.
What is a Tax Code?
A tax code is a code issued to you by HMRC that tells your employer or pension provider the correct amount of tax to deduct from your income. The tax code is made up of numbers and letters, like 1250L, BR, or NT.
If your tax code is '1257L', that means you are entitled to the standard tax-free Personal Allowance of £12,570 for the 2024/25 tax year. The letters in the code refer to any tax reliefs or adjustments in your specific situation.
For example:
L means you get the basic personal allowance.
NT means you're not paying any tax on this income.
What Does the T Mean on My Tax Code?
T denotes that allowances are divided across two or more sources of income, and the code will be reviewed annually by HMRC. If you notice a 'T' at the end of a tax code, it simply means HMRC needs more information from you before they can determine your correct tax code.
To resolve an emergency tax code, you'll need to contact HMRC and provide the details they've requested. This is typically done by:
Logging in to your personal tax account. Here, you can securely message HMRC with the information needed.
Calling the self assessment helpline at 0300 200 3310 and speaking to an advisor. They can update your records over the phone and issue a new tax code.
Filling out any forms HMRC has sent you regarding your tax situation and returning them promptly.
The sooner you provide HMRC with the details they need, the quicker you'll receive an accurate tax code and ensure the right amount of tax is being deducted from your pay.
How to Check Your Tax Code Online
To check your tax code online, there are a few options available. The easiest way to do this is to log into your online tax account with HMRC.
Log into your HMRC account:
- Go to gov.uk/log-in-register-hmrc-online-services and log in with your Government Gateway ID.
- Once logged in, select 'View your tax code' under the 'Tax' section.
- Your tax code will be listed, along with an explanation of what it means.
Why Your Tax Code Might Change and How to Resolve It
Your tax code determines how much tax is deducted from your income, and HMRC may update it for several reasons, including:
- Starting a new job: A new employer may trigger a tax code change, especially if your income details haven't been processed yet.
- Receiving taxable state benefits: If you begin to receive state benefits, such as jobseeker’s allowance or state pension, your tax code might be adjusted.
- Income from an additional job or pension: If you start receiving income from a second job or a pension, HMRC may update your code to reflect the added earnings.
- State Pension changes: Increases or decreases in your state pension payments can result in a code change.
- Job benefits: If your employer informs HMRC that you’ve started or stopped receiving job-related benefits (e.g., a company car), your tax code may change.
- Marriage Allowance: Claiming marriage allowance could result in a tax code adjustment.
- Claiming expenses: If you’re eligible for tax relief on work-related expenses, HMRC can change your code to reflect this.
If HMRC doesn’t receive your income details in time when you start a new job, you could be put on an emergency tax code, which might result in paying more tax than necessary.
How to Resolve Tax Code Issues
If your tax code changes unexpectedly, you can use the Check your Income Tax online service on the GOV.UK website to understand the reason. If the tax code is incorrect, you can:
- Contact HMRC directly to provide updated income details or report any errors.
- Review your recent income and deductions, and ensure they align with the new tax code.
- Resolve emergency tax codes by supplying your new employer with your P45 or submitting a Starter Checklist to ensure the correct tax code is applied.
Conclusion
Tax codes can be complicated, but now you've got the basics down. It's a good idea to double-check your tax code to make sure it's correct. If something still doesn't seem right, you can contact us at Taxd for professional assistance on taxes in the UK.
FAQs
1. How do tax codes work?
Tax codes indicate the amount of tax-free income you are entitled to before paying tax. HMRC assigns a code based on your personal circumstances, such as income, benefits, and allowances. Employers and pension providers use this code to calculate the tax to deduct from your pay.
2. What are emergency tax codes?
Emergency tax codes are temporary codes applied when HMRC doesn’t have complete income details. They often result in paying more tax than necessary until your correct tax code is assigned. Common emergency tax codes are 1257L W1, M1, or X.
3. Why do I have 2 tax codes?
You may have 2 tax codes if you have more than one job or receive income from multiple sources, such as a pension and employment. HMRC assigns a tax code to each source to ensure the correct amount of tax is deducted across your income.
4. What are the new tax codes for 2025?
The specific tax codes for 2025 haven't been officially announced yet, but they generally follow the personal allowance changes. For example, in previous years, codes like 1257L reflected the standard personal allowance. Updated codes for 2025 will depend on changes in the personal tax allowance for that year. You can check closer to 2025 for official updates from HMRC.