HMRC have updated their ‘Check what your tax code means’ online tool which is designed to explain to taxpayers what the numbers and letters in the tax code mean and how much Income Tax will be paid.
It has two sections:
1. Use this tax code checker to:
As above, this is HMRC’s attempt to encourage users to understand what the different elements in their tax code mean, including any deductions.
Importantly, it contains information to taxpayers on how to update their records if the information HMRC hold is incorrect.
- To use the tool, you will need your:
Before starting to use the tool, the user should have their current tax code, earnings and benefits information to hand (both State benefits or company benefits) This includes earnings from a pension, including the State Pension. As the taxpayer progresses, the online tool asks for the following information:
- The UK nation the taxpayer lives in (Wales, Scotland etc);
- Whether the tax code is NT or BR, D0, D1, 0T (or Welsh and Scottish equivalents);
- Whether the tax code is prefixed K (or Welsh and Scottish equivalents);
- The numbers in the tax code;
- The tax code suffix letter (e.g., L or M). Not the prefix letters (C, S and K);
- Whether the code is operated non-cumulatively (i.e. week 1 / month 1); and
- Estimated annual income
When this tool first launched in 2023, ICB commented how useful it was as it empowered the individual taxpayer to check their own code. As we often state, advising on personal taxation is outside of our professional remit, although:
- We believe that the numbers within a tax code will be simple to explain, always referring the taxpayer to their Personal Tax Account and the feature ‘Check your Income Tax for the current year’ and / or the Check your Income Tax online service which does allow them to query their tax code). However, members must remember that we do not have access to an individual’s fill income over the course of the tax, nor do we want that personal information; and
- We believe it is easy to explain whether a tax code will be operated on a cumulative or non-cumulative basis. However, the way that we operate the tax code basis will be according to HMRC’s instructions
The prefixes and suffixes, however, may not be easy to explain so we detail these below for your information:
The Prefixes
The following are the codes and prefixes issued by HMRC:
|
Code / Prefix
|
Meaning
|
|
BR
|
All income from this job or pension is taxed at the Basic Rate (20%)
|
|
C
|
HMRC have defined a Welsh taxpayer and income or pension is taxed using the rates in Wales (as set by the annual Welsh Rate Resolution)
|
|
CBR
|
All income from this job or pension is taxed at the Welsh Basic Rate (20%)
|
|
C0T
|
As per 0T below, however, the employer cannot allocate code C0T for a new starter
|
|
CD0
|
All income from the job or pension is taxed at the Welsh Higher Rate (40%)
|
|
CD1
|
All income from this job or pension is taxed at the Welsh Additional Rate (45%)
|
|
D0
|
All income from this job or pension is taxed at the Higher Rate (40%)
|
|
D1
|
All income from this job or pension is taxed at the Additional Rate (45%)
|
|
K
|
A K prefix code indicates to the taxpayer that they have used up all their personal allowances and, in fact, have negative personal allowances. Possibly, the value of the benefits received is higher than the personal allowance or there is tax to pay from a previous year
|
|
NT
|
No tax is payable
|
|
0T
|
If allocated by HMRC, this code means there is no entitlement to any personal allowances. Or, if allocated by the employer, this is because they do not have information necessary to allocate a code (for a new starter) or where a payment is made after the P45 has been issued
|
|
S
|
HMRC have defined a Scottish taxpayer and income or pension is taxed using the rates and bands in Scotland (as set by the annual Scottish Rate Resolution)
|
|
SBR
|
All income from this job or pension is taxed at the Scottish Basic Rate (20%)
|
|
S0T
|
As per 0T, however, the employer cannot allocate code S0T for a new starter
|
|
SD0
|
All income from the job or pension is taxed at the Scottish Intermediate Rate (21%)
|
|
SD1
|
All income from the job or pension is taxed at the Scottish Higher Rate (42%)
|
|
SD2
|
All income from the job or pension is taxed at the Scottish Advanced Rate (45%)
|
|
SD3
|
All income from the job or pension is taxed at the Scottish Top Rate (48%)
|
The Suffixes
The following are the suffixes issued by HMRC:
|
Suffix
|
Meaning
|
|
L
|
There is an entitlement to the standard Personal Allowance
|
|
M
|
The taxpayer is the recipient of 10% of their partner’s Personal Allowance (the Marriage Allowance)
|
|
N
|
The taxpayer has transferred 10% of their Personal Allowance (the Marriage Allowance)
|
|
T
|
The tax code includes other calculations to work out the Personal Allowance
|
For Bookkeepers
Except in the cases of new starters and payments after the P45 has been issued, HMRC will allocate the tax code and the relevant prefixes / suffixes. The employer, therefore, is only responsible for:
- Using the tax code allocated by HMRC; or
- Allocating a new starter tax code (i.e. from the P45 or application of details from the Starter Checklist); and
- Correctly applying the 0T regime to payments made after the P45 has been issued (payments after leaving)
