Understanding your Tax Code 2017- 18
Your tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension.
HM Revenue and Customs (HMRC) will tell them which code to use to collect the right tax.
Your tax code will normally start with a number and end with a letter.
1150L is the tax code currently used for most people who have one job or pension.
The numbers in your tax code tell your employer or pension provider how much tax-free income you get in that tax year.
- HMRC works out your tax-free Personal Allowance.
- Income that you haven’t paid tax on (such as untaxed interest or part-time earnings) and the value of any benefits from your job (such as a company car) are added up.
- The income that you haven’t paid tax on is taken away from your Personal Allowance. What’s left is the tax-free income you’re allowed in a tax year.
- The last digit in the tax-free income amount is removed.
What the letter means
Letters in your tax code refer to your situation and how it affects your Personal Allowance.
|Letter||What it means|
|L||You’re entitled to the standard tax-free Personal Allowance|
|M||Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance|
|N||Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner|
|S||Your income or pension is taxed using the rates in Scotland.|
|T||Your tax code includes other calculations to work out your Personal Allowance, for example it’s been reduced because your estimated annual income is more than £100,000|
|0T||Your Personal Allowance has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code|
|BR||All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)|
|D0||All your income from this job or pension is taxed at the 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 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 ‘W1’ or ‘M1’ at the end
These are emergency tax codes.
If your tax code has a ‘K’ at the beginning
Tax codes with ‘K’ at the beginning mean 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 benefits you need to pay tax on – these can be state benefits or company benefits
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.
Emergency tax codes
If you’re on an emergency tax code your payslip will show:
- 1150 W1
- 1150 M1
- 1150 X
These mean you’ll pay tax on all your income above the basic Personal Allowance.
You may be put on an emergency tax code if you’ve started:
- a new job
- working for an employer after being self-employed
- getting company benefits or the State Pension
Emergency tax codes are temporary. Your employer can help you update your tax code.
You may be put on an emergency tax code if you change jobs. HM Revenue and Customs (HMRC) will correct it automatically after you’ve given your employer details of your previous income or pension.
HMRC will also update your tax code when:
- you’ve started to get income from an additional job or pension
- your income has changed
- you’ve started or stopped getting benefits from your job
- you get taxable state benefits
- you claim Marriage Allowance or expenses that you get tax relief on
HMRC will adjust your tax code so you pay the right amount of tax across the year. They’ll write to you or email you when your tax code has been updated.
They will also tell your employer or pension provider that your tax code has changed.
The most common tax code for tax year 2017 to 2018 is 1150L. It’s used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).
1150L is an emergency tax code only if followed by ‘W1’, ‘M1’ or ‘X’.
The numbers in an employee’s tax code show how much tax-free income they get in that tax year.