Tax code 1257L explained as Britons risk being ‘lumped with an expected tax bill’ | Personal Finance | Finance

A person’s tax code may have changed if their circumstances have become different going into the new tax year.

The most common one is 1257L, which is based on the Personal Tax Allowance of £12,570 – this is the amount people can earn before they need to pay tax.

Jonathan Merry, CEO of Moneyzine.com warned people to check their tax code if they want to avoid “nasty surprises” at the end of the year.

If someone is in the wrong tax code and they are underpaying, they will be forced to pay the difference back to HMRC at the end of the tax year.

‘It’s better to be safe than sorry,” he added.

He explained some of the most common tax codes in the UK.‌

1257L: This is the “most common” tax code and is used for most people who have one job or pension. It indicates that your personal allowance for the current tax year is £12,570, which means you can earn up to £12,570 before you start paying tax.‌

BR: He explained that this tax code means that someone is being taxed at the basic rate of 20 percent on all of their income, with no personal allowance.

This is usually used for a second job or pension where they are already using their personal allowance on their main job or pension.

D0: This tax code means that someone is being taxed at the higher rate of 40 percent on all of their income, with no personal allowance.

This is usually used for a second job or pension where they are already using their personal allowance on their main job or pension.

K: Mr Perry said: “This tax code is used when you have income that is not being taxed through your main job or pension, such as income from self-employment, rental income, or benefits.

“It means that you have additional tax to pay on top of the tax being deducted from your main income.”

NT: This tax code means that people pay no tax on their income, usually because all of their income is below their personal allowance or they are a non-UK resident.‌

He continued: “What often catches people out is that it’s not HMRC’s responsibility to ensure your tax code is correct, or even your employers!

“The responsibility firmly rests with you. That means that if your tax code is incorrect, yes it can often mean you’re due a windfall from tax you’ve overpaid, but some people will be liable to repay the tax that they owe if they’ve been found to have paid too little.

“Now is not the time to be lumped with an expected tax bill!”

He stressed the importance of people checking their tax code as it is crucial to avoid overpayments to HMRC, or underpayments.

Britons can check their payslip to see what tax code is being used, or P45 if they’re currently out of work.

The HMRC app also gives people the option to check your tax code.

He concluded: “If you think you’re in the wrong tax code, you should contact HMRC as soon as possible to get it corrected so you avoid any nasty surprises when next year’s tax season comes around.”