What does your tax code mean?

HMRC has released a new tool to assist with understanding what a tax code means, how it is made up and what your likely tax change will be.

For many new users, tax code notices now come through a personal tax account by default. It is likely that the new tool will replace the explanations that came with paper notices and could be useful to direct employees to if they require further assistance with understanding their tax code.

The tool asks for the following information:

• which country you live in
• is your tax code BR, D0, D1, 0T, NT or other
• if other, does it start with a K?
• the numbers of the tax code
• the suffix letter
• if the code has W1,M1 or X at the end
• estimated annual income.

From this, the tool provides an amount of tax expected to be deducted in differing pay periods and an explanation of what the code means.