So a lot of people don’t really understand what the HMRC PAYE codes mean with weird letters and numbers. So here I’m gonna just discuss the components of them. Every person in the UK who receives income through employment or PAYE is taxed based on their tax code initially, which is assigned by HMRC to their employer.
So everyone begins with a personal 12,517 the time of recording this video, which is recording the tax code 1257L, that means you get 1048 tax-free per month, or 242 pounds per week. The letter L in your tax code indicates that you are entitled to the standard personal allowance, so other letters that may appear paid your tax code include m.
So that indicates you’ve received a marriage allowance from your partner and that increases your personal allowance. T means that your tax code includes additional calculations, for example benefits, deductions, or expenses, which may reduce your personal allowance. If your tax code is zero t, that means that your personal allowance has been fully used or your employer does not have the necessary information to issue a tax code.
BR stands for basic rate. That means that all of your income from that source will be taxed at the basic rate without the use of allowance. D zero means that all of your income from that job will be taxed at 40% without any allowances, and D one means that all of your income from that source will be taxed at the additional rate of 45% without any allowances.
Finally, NT ensures that none of that income is subject to tax. Particularly if you are abroad. So please like, follow and comment and get in touch with me via my website if you have any questions. So, which tax code do you have and do you think this is a good system? Did you understand it already?