Many of the tax codes in the UK change every year. This is because the ‘personal allowance’ changes every tax year. As many tax codes are based on the personal allowance – the amount of money you are allowed to earn every year without paying tax – changes in the level of the personal allowance results in changes to the tax code.
Our guide looks at tax codes for 2011, including information on the tax code 747L; likely to be one of the most common.
Changes from 6 April 2011
From 6 April 2011, there will be several tax changes that you should be aware of. The two most important are:
- the Personal Allowance will rise from £6,475 to £7,475
- the basic rate limit will be £35,000
As the basic personal allowance for the 2011/12 tax year is increasing from £6,475 to £7,475,the normal tax code for under 65s will change from 647L to 747L.
Tax code 747L
The easiest way to understand what your tax code means is to take the number from it and multiple it by 10. This will provide an estimate of the personal allowance that has been assigned to you. For example, if your tax code for the new tax year 2011/12 is 747L you would take ’747′ and multiple it by 10 to give: 747 x 10 = £7470. This means your personal allowance is at the standard level – £7,475.
747L is also the ‘emergency tax code’ in 2011/12. You might be put on an emergency tax code if you have started a new job and haven’t got a P45 from your previous employer or you have started a new job and were previously self-employed.
Why is my tax code not 747L?
There are lots of reasons why your tax code may be different from the norm. If you receive any additional company benefits (such as a company car or private medical insurance) this may affect your tax code. Receiving other income (pension or rental income) may also affect your tax code. And, tax codes are often altered to collect any underpaid tax from previous years or to collect less tax if you are due a tax rebate.
Furthermore, if you receive any additional personal allowances (such as the ‘age related allowance’ if you are over the age of 65) then your tax code will be different.
If you are not sure how your tax code has been calculated, get in touch with your Tax Office for an explanation of how it is worked out.