A tax code is a series of letters and numbers issued by HMRC that tells an employer or pension provider how much tax-free pay an individual is entitled to before Income Tax is deducted through PAYE. It reflects the Personal Allowance and any adjustments for benefits or previous under or overpayments.
Checking a tax code is correct
An incorrect tax code can mean too much or too little tax is deducted, so it is worth checking a new tax code against a payslip or pension statement, especially after changing jobs, starting a second income, or receiving new benefits in kind.
Tax rules depend on individual circumstances and can change. This glossary is general information rather than personalised tax advice.