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Common Questions About Tax

Q. How is a tax code calculated?

A. The most common tax code currently is 810 followed by the letter L.

The number 810 relates to the amount of money that can be earned tax free per annum.

The code is multiplied by 10 to give the total tax free earnings in that year. So for the 2012/2013 tax year if you have a tax code of 810L you can earn £8105 tax free this year.

The letter attached to the tax code represents a change to a code specific to your circumstances.

Please find below other regular tax code letters and their significance:

  • L - If you are receiving the basic personal allowance and under 65.
  • K - Applied most commonly to people with company benefits i.e. a company car benefit where your allowances are less than total deductions.
  • BR - Stands for basic rate. Applied most commonly for second forms of employment. The amount of tax deducted is currently at 20%.
  • Y - Applied for people over 75 who are entitled to a full personal allowance.
  • DO - Applied to income taxed at the higher rate of tax which is currently 40% to change to 50% in the 2010-2011 tax year.
  • NT - Stands for non-taxable and is applied to income which is not taxable.

You may also wish to read:

 

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