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The New Tax Code for 2013/2014

Over the last few weeks you have probably received your PAYE Coding Notice. This tells you what your tax code will be for the new tax year and how this has been worked out.

For most people, their tax code will change in 2013/2014. But, why does your tax code change? How is it worked out? And what do you have to do about it? Keep reading to find out.

Why do I need a new tax code?

Most people’s tax code changes every year. This is normally because the amount of money you are allowed to earn before you start paying tax – your ‘allowances’ – change on an annual basis.

For example, the basic Personal Allowance in the 2013/14 tax year is rising from £8,205 to £9,440 as part of the government’s commitment to help low income families.

Your new tax code will ensure that you pay the right amount if tax on your income. It also makes sure that your tax payments are spread out over the course of the tax year.

Each time your tax code changes, HMRC send this code to your employer or pension provider. This ensures that the right amount of tax is taken off.

How is this tax code worked out?

1. Work out your allowances

Most people are entitled to the basic Personal Allowance. In the 2013-14 tax year, this is £9,440. It means you can earn £9,440 in the tax year before you start to pay any tax.

If you were born before 6 April 1948 or you are registered blind, you may be entitled to additional allowances.

2. Work out your deductions

Your deductions are any income which you have not paid tax on. This may include company perks, untaxed savings interest or earnings from a second job.

3. Take one from the other

To work out your tax code you take away your deductions from your allowances. So, if you were entitled to the basic Personal Allowance and had no deductions, you would be able to earn £9,440 in the 2013/14 tax year (£9,440 minus £0) before you had to pay any tax.

4. Divide by 10 and add the appropriate letter

Once you have worked out the amount you can earn before you start paying tax, you divide this number by 10. In this case, this would be 944. You then add the appropriate tax code letter for your circumstances.

If you are entitled to the basic Personal Allowance, the letter is ‘L’. So, in this case, your tax code would be 944L.

If you are over a certain age, have more than one job or earn a high amount, your tax code may include a different letter.

What do I have to do when I receive my tax code?

Nothing, unless you think that your tax code is wrong. If this is the case, you should contact HMRC. Make sure you have your National Insurance number and income details to hand.

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james douglass - Sunday, March 17th, 2013

i have a company pension of £888.52 per month.
also a state pension of £133.63 per week.
i have been put on a BR tax code for 20013/14.
is this correct.

TaxFix - Tuesday, March 19th, 2013

james douglass: If you have a second source of income, this may be on an emergency tax code as your primary source may receive your tax allowance. You can check to make sure that this is the case and that you are receiving your full allowance.

Angela Cormick - Wednesday, March 20th, 2013

I only have one job working for the NHS 22.5 hrs a week I receive no other income. I have been given a new tax code for 2013/2014 BR is this correct?

raymond hooley - Wednesday, April 17th, 2013

ihave three pensions come two 15808 pounds iam awidow how much tax will ihave topay

susie andrews - Tuesday, April 23rd, 2013

Why after paying tax all of your working life is the state pension whacked for tax once more. It means that i am living on £35 per day after working for 45 years!

A Thomas - Friday, April 26th, 2013

Why on earth are we paying tax on our company pension. Does’nt make any sense why people would wish to pay into a private pension.

P A Brown - Saturday, May 4th, 2013

I am a widow.I get state pension plus Half my late husbands Post Office pension plus my small works pension the code on the Post office pension is 256P the code on my works pension is 77T what doe this mean????

TaxFix - Saturday, May 4th, 2013

P A Brown: The easiest way to think about your tax code, is to take the number and multiple it by 10, this will be your tax free allowance. So in your case you have been given a tax free allowance of roughly £2560 and £770.

anna-marie - Saturday, May 4th, 2013

i have worked at the same job since 2008 and my tax code is different every year and have never had a tax refund is this right

Sarah Smith - Saturday, May 4th, 2013

I understand the tax code changed on the 6th April. Does this mean that for a person paid monthly during April 2013 they would pay tax under the previous tax code from 01/04/13 to 05/04/13 and then the rest of the month the new tax code would come into affect or due to the fact that the payment is received on the 30/04/13, is the new tax code take back to the first day of the payment period ie 01/04/13?

Brian Willcock - Monday, May 13th, 2013

I have a work based pension my state pension and a part time job. The job is no problem i have a BR code. I received my tax coding in January 2013 and today i have received notice of a new coding, Januarys was 204L todays is 155L.
Today’s letter includes a adjustment to tax rate bands a -£488 any idea why this is as my total income will not exceed the basic 20% taxband.
Regards Brian.

g smith - Thursday, May 23rd, 2013

i am on 449 not 944 tax cobe i earn 16000 per year why

TaxFix - Friday, May 24th, 2013

g smith: There could be a number of reasons why you are on a different tax code, it might not be an error. You can contact your local tax office and ask them to provide a breakdown on how they calculated your tax code, which you can then reconcile.

TaxFix - Friday, May 24th, 2013

Brian Willcock: You can contact your local tax office and ask them to provide a breakdown as to how they have calculated your tax code.

TaxFix - Friday, May 24th, 2013

Sarah Smith: The new tax code takes effect at the start of the new tax year. April 6th.

helen oloye-tella - Friday, May 31st, 2013

My new tax code is 944t but i dont have a second job and only earn 20k

Alderson - Wednesday, June 5th, 2013

How do I check that I am paying the right amount of Tax with a code of 0T CUMUL

TaxFix - Friday, June 28th, 2013

Alderson: You can use our tax calculator to see if you are paying the right amount of tax. The link is here: http://taxfix.co.uk/how-much-tax-will-i-pay/index.php

TaxFix - Friday, June 28th, 2013

helen oloye-tella: The normal tax code for this year is 944L.

Wayne Clarke - Thursday, July 18th, 2013

How much tax do I pay with a tax code of 585T

TaxFix - Tuesday, July 23rd, 2013

Wayne Clarke: It depends on how much you earn during the tax year.