Your employer or your pension provider calculates the tax codes. They use a tax code to work out an amount of Income Tax to deduct from your pay or from your pension. You may not get a coding notice at all - if the letter in your tax code is L, P, V or Y, your employer can often just alter your code automatically. The first step takes place by HM Revenue and Customs. They work out how much tax free Personal Allowance you have.

Letters in your tax code refer to your situation and how it affects your Personal Allowance. Letters The tax code list 2022 shows the each code beginning with a number and ending with a letter. Most people who only have one job or pension will currently get the 1257L tax code. Being on an emergency tax rate means you pay a levy on all your income above the basic Personal Allowance. This might happen if you start: Get a head start on your 2022-23 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?. HMRC works out your individual number based on your tax-free Personal Allowance and income you have not paid tax on (such as untaxed interest or part-time earnings). They also consider the value of any company benefits (such as a company car). What the letters meanYour employer can help you update your tax code by sending details about your previous income or pension to HMRC. If you’ve started a new job However, if this additional income exceeds your Personal Allowance, wiping it out completely, you’ll be shunted onto a K code.

However, there will also be either W1(for weekly pay) or M1(for monthly pay). This signifies that you are being taxed as if it is the first week or month of the financial year. Unless otherwise stated, the following figures apply from 6 April 2023 to 5 April 2024. PAYE tax and Class 1 National Insurance contributions All your income from this job or pension is taxed at the additional rate in Wales (usually used if you’ve got more than one job or pension)This details the allowances and deductions you are entitled to and which were used to work out your tax code. You can only claim relief on things that are used just for your work, and which you don't use in your private life.