Step one
Your tax allowances are added up (in most cases this will just be your personal allowance and any
blind person’s allowance, in some cases it may include certain job expenses).
Step two
Income you’ve not paid tax on (for example untaxed interest or part-time earnings) and any taxable employment benefits are added up.
A tax code is used by your employer or pension provider to calculate the amount of tax to deduct from your pay or pension. If you have the wrong tax code you could end up paying too much or too little tax.
A tax code is usually made up of one letter and several numbers, for example: 117L or K497.
If your tax code is a number followed by a letter, you can multiply the number in your tax code by 10, to get the total amount of income you can earn in a year before paying tax.
The letter shows how the number should be adjusted following any changes to allowances announced by the Chancellor – common tax code letters are explained below.
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