Tax codes may seem like a jumble of letters and numbers but they are actually surprisingly straightforward. Most of the time, a code will look something like this: 170L. The number is one tenth of the amount you can make before you need to pay taxes, 170 means £1700. The letter is a special code that signifies your tax and deduction status. Because of their relative simplicity, it isn't hard to calculate your own codes.
Add up all of your tax allowances.
Total all income that hasn't been taxed and any taxable non-income.
Subtract the total of step two from the total of step one; this is your total tax-free income.
Divide your tax-free income by 10 and drop any remainder, this becomes the number part of your tax code.
Find the letter part of your tax code by assessing your personal situation. Most people in normal situations are L but older people are P,V or Y and many small business owners are BR.
Consult a tax guide to verify the letter part of your code, the number part is easy but the letter can be tricky.
Tips and warnings
- Consult a tax guide to verify the letter part of your code, the number part is easy but the letter can be tricky.