Just as the 2023/24 code was, the basic PAYE tax code is set at 1257L, which gives employees a personal allowance of £12,570 for 2024/25.
Where a taxpayer has just one source of PAYE income, either from employment or a private pension, 1257L is the most common tax code.
What will the 'emergency' tax code be for 2024-25?
1257L is the default code. Tax codes normally work on a cumulative basis for the whole tax year. However, codes suffixed with W1, M1 or X are non-cumulative. Tax is calculated for that period only.
What do the letters mean?
OT - Where earnings exceed £125,140, individuals cannot benefit from the personal allowance and will often have an 0T tax code. Unlike BR, D0 and D1 codes, 0T does not apply a flat rate tax percentage but rather takes account of the basic, higher and additional rate bands. Depending on the level of income some income might be taxed at the higher and additional rates (40% and 50% respectively), in addition to the 20% basic rate.
BR - All income from this source is taxed at the basic rate (currently 20%).
D0 - All income from this source is taxed at the higher rate (currently 40%).
D1 - All income from this source is taxed at the additional rate (currently 45%). This applies on income exceeding the £125,140 threshold
K - This is effectively a negative tax code where tax on Benefits in Kind or other income not taxed at source exceeds the personal allowance
T - Your tax code includes other calculations to work out your Personal Allowance
NT - You do not pay tax on this source of income
N - Marriage Allowance: you’ve transferred 10% of your partner’s Personal Allowance to your partner
S - Scottish Taxpayer
C - Welsh taxpayer
What do the numbers mean?
The numbers in your tax code tell your employer or pension provider how much tax-free income you get in that tax year, so they can deduct tax on income above that amount.
HMRC works out your individual number based on your tax-free Personal Allowance and income you have not paid tax on (such as the state pension, untaxed interest or part-time earnings). They also consider the value of any company benefits (such as a company car).
Do I need to check my tax code?
There is a simple answer. Yes, you do!
Many people do not bother to check their tax code, either just assuming HMRC cannot be wrong, or not really understanding what it means.
We do not get copies of PAYE Coding notices so are not aware when they are issued. If you have any doubt whether yours is correct, please let our director, Heather, who leads our personal tax team have a copy, so she can check it for you.
Whether you are over-paying or under-paying tax, it is far better to pay the right amount in the first place.
HMRC may not have entirely accurate information when they issue your tax code so do not just assume your code is correct. We have seen many examples of where tax codes have been very wrong. Thinking you are paying the right amount of tax, just to find out later you aren’t, can cause financial problems.
We are here to help.