The tax return deadline has just passed and the new tax year is just around the corner. With a new fiscal year comes a new tax code and we thought we would take this opportunity to write an article about it, what it means for you and how to interrupt it.


Tax Codes

Everyone that has a job in England is assigned a tax code. Your tax code is usually made up for numbers and letters and it reflects any allowances, expenses and relief that HM Revenue & Customs believes that you should be assigned.

Tax Allowances

Each year you are given a tax free allowance, an amount that you can earn before you need to pay tax. Usually this allowance increases annually, taking into account inflation but over the 2010/2011 and 2009/2010 tax year this allowance has remained at £6,475. Luckily for everyone, as of April 6th 2011 your personal allowance will increase by £1000 to £7,475.

2011/2012 Tax Code

Due to the increase in the personal allowance, your tax code should change to reflect this difference. The normal tax code for the 2009/2010 and 2010/2011 tax year was ’647L’. This will change to ’747L’ on the 6th April when the new tax year starts.

What does Your Tax Code 747L mean?

The easiest way to understand your tax code is to take the number from it and multiple this by 10. This will provide an estimate of your tax free allowance that has been assigned to you. For example: If you tax code is 747L you would take ’747′ and multiple it by 10 to give: 747 x 10 = £7470

Why Is my Tax Code Different to my Friends?

Everyone’s circumstances are different. Some people have tax codes with lower numbers because they receive other taxable work benefits like company cars. Other individuals receive income from rental properties and as a result they have their tax code adjusted to reflect this. If you are unsure if you have been assigned the correct tax code you can contact your local tax office and ask them how they calculated it. They should provide a coding notice outlining how they came to their calculation, and you can confirm if this is indeed correct based on your circumstances.

What do I do if I have been put on the wrong Tax Code?

It is not uncommon to be put on the wrong tax code. If you have been put on the wrong tax code there is a good chance that you could overpaid tax and therefore be due a tax refund. You can apply for a tax refund at the end of the tax year and reclaim any overpayment. Don’t leave it too lateas the refund will expire.

Do you have any questions about tax code 747L or do you think you might be on the wrong tax code, ask your questions in the comment section below and we’ll do your best to answer them: