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How to change your tax code

  • 3 min read
  • Last updated 10 Jun 2024

In this guide, we’ll teach you how to change your tax code, to ensure you’re paying the correct amount of tax. Both underpaying and overpaying tax can have unwanted consequences, so it’s best that you’re always on your A game.

What is a tax code?

A tax code is a bunch of numbers and letters that tells HMRC the amount of tax you should be paying. Although it may seem random, it’s not quite. 

Where can you find your tax code?

It can be found in several places, but the most common will be on any of your payslips. If you can’t find one, then call up HMRC. They’ll be able to help.

Of course, they will ask you security questions and require some other personal details, like your National Insurance number, so have them on hand, ready to go when they eventually answer!

Remember, the future belongs to those who prepare for it – no matter how dramatic that may sound, it rings true in even the small things.

What do the numbers and letters on your tax code mean?

The numbers on your tax code tell your employer or pension provider how much tax-free income you are entitled to in a particular tax year.

The letters are a guide to something further about your personal tax situation. Perhaps you’re using the Marriage Allowance or you’re a high earner and pay the additional rate tax of 45%. 

These things are important for HMRC to know so they can tax you fairly. Here’s an image with a complete list of the letters:

Pro tip: If you take up a second job, then you don’t get a Personal Allowance for this one. To maximise your earnings, try to make sure that the job that pays you more is the one with the ‘L’ at the end of the tax code. Your second payslip will have the letters ‘BR’ on it.

What is the most common tax code?

The most common tax code is 1257L. Every person gets a £12,570 tax-free income allowance called a Personal Allowance. This means you won’t be taxed on any money you earn up until that amount. After that, you’ll have to pay Income Tax based on your earnings. 

Here are the Income Tax rates in the UK for the 2024/25 tax year:

IncomeTax rate
Up to £12,5700%Personal allowance
£12,571 to £50,27020%Basic rate
£50,271 to £125,14040%Higher rate
over £125,14045%Additional rate

If you’re earning between £100,000 and £125,000, there is a not-so-secret 60% tax trap. Essentially, because you earn so much, you lose your tax-free Personal Allowance and end up paying a higher tax rate for a portion of your income.

It’s best to get professional help to maximise your earnings

TaxScouts offers a 30min, 1-1 tax advice consultation with an accredited accountant to make sure that you’re always in the best tax position possible. Stay tax-efficient, always!

Your situation

Outlined number oneImage of an arrow
Tax code
?
Annual salary
£

Results

Outlined number two
  • PAYE earnings
    £49,000

How your tax code is calculated

There are three main components that determine your tax code:

  • What you earn
  • Allowances you’re claiming
  • Your tax-free allowances

What if your tax code’s wrong?

If it’s wrong, you will need to know how to change your tax code. But first, you need to figure out why it’s wrong. Most probably, it’s been a change in your circumstances, like a new job (congrats!) but sometimes it can be HMRC’s error. It’s always best to check.

How to change your tax code

Get in touch with HMRC if you:

  • Are on a BR, D0, or D1 tax codes and it’s not from a second job
  • Have just started a new job – to check that you’re not on an emergency tax code
  • Suspect you’re paying too much or too little tax (especially the latter)

HMRC will issue your employer or pension provider a revised tax code – see it, say it, sorted!

You can contact HMRC by giving them a ring at 0300 200 3300 or using your personal tax account to access their online services

If you go the phone call route, keep your National Insurance number to hand.

What happens next?

If you’ve overpaid tax, this will be repaid either through your next pay or at the end of the tax year when you receive your P8100. If you’ve paid too little tax this will be recovered through your income or you will receive a Simple Assessment tax bill.

TaxScouts is always here to help

Whether you need an accredited accountant to advise you or talk through your tax situation with you or you need to file a personal or company tax return.

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