HMRC tax codes explained
Tax codes are HMRC's way of checking how much tax and National Insurance you're supposed to pay each year. If you've got any special circumstances that change the tax you owe, they'll be shown in your tax code. For most people in the 2021/2022 tax year, for example, the basic tax code would be 1257L. That’s assuming that you’ve only got 1 job or pension. If you’ve got more sources of income being taxed through PAYE, things get more complicated, which we’ll talk about further down.
Breaking that basic code down, the taxman can tell that there are no special circumstances that apply (the “L” part), and that the taxpayer gets a standard tax-free Personal Allowance of £12,570 (the “1257” part, which you multiply by 10). That allowance means that they won't be taxed until they're making more than this. So, the starting point for paying PAYE tax on your income is £242 per week (or £1,048 per month).
Want to know more about the letters in your tax code? Check out the list below.