Guide to Tax Codes

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. The code is worked out by HMRC, who sends it to your employer or pension provider. If your tax code changes, just let us know and we’ll make sure it’s right - it’s all part of our aftercare service.

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Tax Codes

What does my tax code mean?

Your tax code is made up of some numbers and (usually) a letter. There might be more than one letter, depending on your situation, but basically it breaks down like this:

The numbers show your "personal allowance". This is how much money you can earn per year without paying tax on it. Right now, yours probably says 1257L - which actually means you can earn £12,570 tax-free and this tax code replaces the tax code 1250L.

The letter in your code notes any particular conditions that affect what you can earn before paying tax. If it's an L, then there's nothing happening to change your Personal Allowance. You can see a full list of what the letters in your tax code mean but definitely get in touch if you can't make sense of your code.

Check my tax code

Tax code Changes

Will I know if my tax code changes?

Your payslip should have your tax code on it. HMRC may tell your employer to use a higher tax code after you’ve claimed your tax refund because they assume you will be eligible for this tax relief next year – but you may not be. It all depends on how much travel you do.

If your tax code is changed, whether by HMRC or by us, it is important to check on your payslip that your employer is using the correct code.

If your tax code changes then HMRC will have sent a letter to your employer to let them know the code they should be using to work out the amount of tax they take from your wages. If you have overpaid tax then we will be able to sort this out as part of your next refund, of course, but it's better that you're not out of pocket for that long.

A higher tax code means you can earn more money before you start paying tax, so you’ll pay less tax over the year. But tax rebates are hardly ever the same two years running, so if you are due a tax rebate and your claim is smaller, you won’t have paid enough tax and you’ll owe money to HMRC. If you need any help on how to check this then give us a call.

Tax Code Changes

What should I do if my tax code changes?

After you've claimed a tax refund, HMRC will usually change your tax code.  The thing is, they tend to assume that your expenses will stay the same from year to year.  In reality, work expenses often change over time.  If yours drop, for instance, you could end up owing extra cash to HMRC.  Of course, a refund is much better than a tax bill.  That's why we always correct your tax code as part of our aftercare service.  If you spot a change in your tax code, just let us know and we'll take care of it.

Tax Code Review

How often do I need to check my tax code?

It's vital that you check your tax code every year, to make sure it's still correct. Your code can change over time, according to your circumstances. Things like stopping work part-way through a tax year or having a second job or income can all make a difference to your tax code, for example. 

Tax Code Review

How do I know if my tax code is correct?

RIFT can quickly and simply check you're on the right tax code, and fixing it if it's wrong. Having the wrong tax code can be dangerous. When you work PAYE, your tax code tells your employer how much needs to come out of your pay before you get it. It also determines how much you can earn before you start paying tax at all.

When it comes to dealing with HMRC, paying too little tax can be as bad as, or worse than, paying too much. The taxman might make you wait a few weeks and jump through a few hoops when he owes you cash. He can be lot quicker off the mark when the shoe's on the other foot, though.

With the RIFT Tax Code Review, our experts will check the tax you've been charged in the current year to make sure it's correct. If there's a mistake, we'll contact HMRC and get it corrected. We'll also look back over the tax you've paid in last 4-years. This is particularly important, because tax refunds can be claimed for up to 4-years back. If you've paid too much in previous years without realising, there may still be time to reclaim it.

Tax Code Advice

Why is my tax code wrong?

There are a couple of reasons why HMRC might have got your code wrong. One of the main ones we deal with at RIFT is expenses that go up and down a lot. If you've made a tax refund claim for things like travel, the taxman assumes your expenses will be the same next year. With that in mind, he'll adjust your tax code. Of course, if your expenses change, you could easily find yourself with the wrong code.

Another problem might be if your main job pays you less than your Personal Allowance. Since your second job gets taxed from the start, you won't be getting the full benefit of your allowance. You can get it refunded, but it's still something you have to keep an eye on.

Tax Codes

Where is my tax code?

You will find your tax code on your P45, P60, the PAYE coding notice sent by HMRC or on your wage slip. Your tax code's just HMRC's way of tracking how much you can earn each year before they start taking out your tax contribution. It also lists any special circumstances that apply to you, like second jobs and so on.

It's a lot less scary than it sounds, but it really is worth checking it once in a while. If it changes unexpectedly, let us know and we'll make sure we've got the details recorded.

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Tax Codes

What is a tax code for?

Your tax code is something you only ever notice when it's gone wrong, and you generally need a specialist to sort it out. Tax codes are kind of a mystery to most people, and a lot of the time that's okay but we've created some information for you which we think will help.

That said, the wrong code means you're paying either too much tax, or not enough. Either one of those is a problem that needs fixing in a hurry. Our tax rebate calculator will tell you if you are owed a HMRC tax refund.

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Coding notice

What is a coding notice?

A notice of coding (or P2 form) is the document HMRC uses to tell you what your tax code is. It also explains why you've got the specific code they've given you. You should get a coding notice from HMRC at the start of each tax year. If you notice that your tax code has changed and don't understand why, talk to RIFT and we can explain what tax codes mean. Having the wrong code can easily lead to you paying the wrong amount of tax, such as emergency tax. You should also check that any other information in your notice of coding is correct. The notice should include things like any work expenses or professional fees you're paying. If you see anything that shouldn't be there, or don't see something that should, let RIFT know. We'll get it sorted out and make sure you're only paying the tax you owe.

Our Guarantee

Our guarantee means you'll never lose a penny

When you claim your HMRC tax refund with RIFT, our unique RIFT Guarantee means that you don't have to worry bout the taxman reclaiming any of your money.  So long as you give us full and accurate information, if HMRC disagrees with the amount that we've claimed and ask for the money back, we'll pay it.  It won't cost you a penny.

RIFT Guarantee

Need more help?

Wondering if you can claim a tax refund or need to submit a tax return? Use our online tools to find out if you're owed money by HMRC.

Do I Qualify?

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