Your tax code determines how much tax you pay. If you tax code changes during the tax year, the amount of tax payable may change. In some cases, you may receive a refund and in others, you may have to pay more tax than previously. The reason for this is that HMRC has been looking at your earnings and they think that there needs to be an adjustment, they will send us a notification with a new tax code and they should also send you a letter to your address to let you know of the changes. Tax codes are issued by HMRC only and we cannot amend any tax code until we have received the notification from HMRC.
Understanding your tax code:
The standard PAYE tax code in 2018-19 is 1185L (2017/18 – 1150L). It represents £11,850 of tax-free income (see Q2).
If your tax code is less than 1185 or more than 1185, it just means that your tax-free amount is less than £11850 or more than £11850. This is because you may have underpaid tax in your previous years and they are collecting the underpayment through your PAYE earnings this year. If it is higher, you may have overpaid just small amount and they are refunding it through PAYE earnings too.
W1/M1 (emergency tax code) after your tax code, this may because you have started a job part-way through the tax year. This it is very common for Temps as they go from one booking to the next and from one agency to another. What this code tells HMRC is that you may have had another job before but they don’t know how much tax you already paid (your details have not yet been updated by them), therefore it assumes that you have been earning the same amount, you are earning now, throughout the year. You still have your tax free personal allowance but it may not be properly applied since it does not have the cumulative figures of previous earning and tax paid. In most cases, this code is adjusted by HMRC after the first 4 weeks but if you continue to have this code after 2 months you may need to contact HMRC. You will need to have details of all your previous employment during the tax year.
You may also notice a change in the tax paid when you start a new tax year compare to the year before. This could be because the year before your total earnings was less or up to your annual personal allowance. Once the new tax year starts your personal allowance will be apportioned (prorated) through the year, therefore if your weekly pay is above £228 (see Q2) you will pay 20% on any amount above this figure.
If you have more than one job
You may have more than one job if that is the case your tax code maybe BR or your tax code for each job will less than 1185L. This is because you can only claim one allowance of £11850 per year.
If you already are using your allowance at one employment, then you will have a BR code in the second employment. HMRC may also split your annual allowance between your jobs; if this is the case you both tax codes should add to the total allowance e.g. 685L at one job and 500L at other.
If you think your tax code is wrong please contact HMRC on 0300 200 3300. You will need your National Insurance number when you contact them.
For more information on tax codes please visit: