Personal Tax – Understanding

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Most people do not understand their personal tax and may be paying too much!

The following is a brief outline to assist you:

  • Your tax code for 2023 – 2024:   1257L
  • This means you can earn £12,570 tax free

Dependant on when you are paid – monthly (12) , fortnightly (26), weekly (52), divide £12,570 by the relevant pay frequency to obtain the amount of tax free earnings for each pay period.

i.e. Monthly: £12,570 / 12 = £1047.50 each month tax free

If your tax code is different to the above please check with your tax office. The tax office will also check back for 3 previous financial years.  If it is less or a BR code you may be due a tax refund.

What is BR code?

If you have more than one employer, your tax code (tax free allowance is with employer 1), all other employers will give you a BR code.  BR meaning you are taxed from the first pound you earn as your tax free allowance is being used elsewhere.

If you do not have your tax free allowance elsewhere again speak to the tax office and change your tax code to the relevant employer.

Your P45?

A P45 is to transfer your tax code to a new employer.  If you only have one employer it is given when you leave employment.

If you have more than 1 employer, you can ask for your P45 to transfer to the employer giving you the most work and request the other employer to change to a BR code (you do not have to leave their employment.

2 employers giving you work at same time?

If you are working for 2 employers who are giving you work at same time, speak to the tax office and request your tax code is split.

1257L – split however you want between employers

i.e. 627L and 628L = 1257L in total

Each employer will then give you £6257/£6258 of tax free earnings respectively.

(If you are in receipt of a pension, dependant on the amount your tax code can be split between your pension and your employer)

What changes your tax code?

If you are given any benefits from your company, i.e. private health insurance, company car. You will be taxed on the benefit given to you.

This will be deducted from your tax code

For example, private health insurance cost – £400 per year – tax @ 20% = £80 tax to pay

1257L, £12,570 – £400 = £12,170  New tax code would be 1217L

You are the only person who can mange your tax code, please check and make sure you are paying the right tax!  Don’t pay too much without realising.

Find out more from www.gov.uk/tax-codes/overview