Tax Code Explanation
A tax code is used to determine the amount of tax that will be deducted from a person’s pay or pension.
For tax year 2018 to 2019 the most common tax code is 1185L. This code is used for most people who have one job with no untaxed income, unpaid tax or taxable benefits.
The numbers in the tax code determine how much tax-free income a person will receive. For example, a person who earns £16000 a year will receive £11850 of their income tax free and therefore pay tax on the remaining £4150.
The letters in a person’s tax code refer to their situation and how it affects their Personal Allowance. The letter L in the tax code above is used for an employee entitled to the standard tax-free Personal Allowance.
The tax code is generated by HMRC according to an employee’s individual circumstances. It is advisable to contact HMRC with any queries relating to tax codes in the first instance.
For more help with understanding your tax code please visit https://www.gov.uk/tax-codes
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