Your Tax Tax code is HMRC’s way of knowing how much tax and National Insurance to deduct from your pay. The most common tax code for 2020 /2021 is 1250L, which means you’re entitled to the full personal allowance of £12,500 before any tax is payable. As of 6th April 2021 the personal allowance will go up to £12,570, so you’ll see 1257L for those with payslips.
When your income surpasses £100K your personal allowance gradually reduces, and eventually goes down to zero when you earn £125K or more. When you earn over £100K you’re also required to submit a Self Assessment each year to HMRC, regardless of being employed or self employed. You may also find that your Tax code ends in a letter other than ‘L’ and this usually means that you have some special circumstances that HMRC need to factor in.
My Tax code currently ends with a ‘T’ and it’s changed several times in the last year. If you think your Tax code is incorrect, speak to HMRC directly to check you’re not paying too much or too little tax. In the case of the latter, you wont wont get away with it… and getting a notification that you owe HMRC money is not the kind of stress you need in life.