Tax codes - what you need to know!

A tax code is used by your employer or pension provider to calculate the amount of tax to deduct from your pay or pension.
It is usually made up of several numbers and a letter, for example: 1000L.

If you multiply the number in your tax code by ten, you will get the total amount of income you can earn in a year before paying tax.
For example, the tax code 117L means:

• you are entitled to the basic Personal Allowance
  
• £1,170 must be taken away from your total taxable income and you pay tax on what's left
  

If your tax code has two letters but no number, or is the letter 'D' followed by a number, it is implies you have two or more sources of income and all of your allowances have been applied to the tax code and income from your main job or pension.

Some commonly used tax codes and what they mean :

• 1000L - For people who are eligible for the basic Personal Allowance for the tax year 2014 - 15. It is also used for 'emergency' tax codes.
  
• BR - is used when all your income is taxed at the basic rate - currently 20% (most commonly used for a second job or pension)
• NT - when no tax is to be taken from your income or pension

The tax code spreads your tax-free amount equally over the year so that you get about the same take-home pay or pension each week or month.