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Things You Should Know About Tax Codes

Tax Codes


A tax code is something an employer may use to help calculate the amount of taxes to deduct from an employees paycheck. Improper coding can cause a person to be taxed too little or too much.

Generally tax codes are consisting of numbers and letters which can symbolize different things. Here are common uses for some letters found in tax codes:

L- eligible for basic personal allowance

P- people who are 65-74 years old and are eligible for full personal allowance

Y- people who are 75 years or old and are eligible for full personal allowance

Some people may see a tax code which is strictly letters. These tax codes, such as BR, D0, or NT also help the employer to tax a person correctly. If a person sees the tax code BR all of their income is taxed at a basic rate. If a person sees a tax code of D0 their income is taxed at a higher rate. Lastly, if a person sees a tax code of NT no taxes will be taken.

Tax codes may need to be changed by an employer if an employee undergoes a circumstance in which their taxation would be effected. Things that may affect a tax code can include marriage or divorce, a second income, or a change in pay. By law, an employer must make not of any changes and update all tax codes if a change does occur.


If an employee is taxed improperly due to an improper tax code on the employers end, then the employer must refund the employee the money that has been taken from them.

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