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Visionary Accountants | What does your tax code mean?

Care re HMRC’s ‘Check what your tax code means’ Tool

Monday 14 August, 2023

HMRC are widely publicising their new online tool designed to help taxpayers understand what their tax code means. This is admirable, however, may not help all taxpayers with the result it becomes more confusing, something we need to bring to your attention.

  • The online tool requests the following information:
  • The UK nation the taxpayer lives in
  • Whether the current tax code is BR, D0, D1, 0T (or Welsh and Scottish equivalents) or NT
  • Whether the current code is prefixed K (or Welsh and Scottish equivalents)
  • The numbers in the tax code
  • The tax code suffix letter (L, M, N etc)
  • Whether the code is operated on a week 1 / month 1 basis
  • Estimated annual income

The tool then provides the taxpayer with an explanation of what the tax code means and how much tax they will pay. The results of the tool may result in queries from clients that you need to be aware of.

Action for Taxpayers

As above, it is admirable HMRC have produced this tool in the name of making the tax code transparent to the taxpayer. This is something you are often asked to explain. However, the simple entry of information does not consider the queries that may result and may come to you:

  • For example, if the taxpayer believes they are on the wrong tax code. You must not change a tax code unless instructed by HMRC
  • The fact the personal allowances shown are not those that are given via the PAYE system
  • The fact it gives a precise amount of Income Tax the taxpayer will pay each week / fortnight / month without considering fluctuating earnings, only the annual income value

You are alerted to this tool, however, be aware this gives generic guidance. The very best way for a taxpayer to check their tax code and their actual personal allowances is using the ‘Check your Income Tax for the current year’ which accesses the Personal Tax Account.

You are advised to direct queries to the later tool which does allow the taxpayer to query their tax code, ask for HMRC to amend it and provide you the authorisation necessary to change it.

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