TAX CODE 1250L is the tax code currently used for most people who have one job or pension. What does this particular tax code mean, and how are tax codes worked out by HM Revenue and Customs (HMRC)?
A tax code is used by an employer or pension provider to work out how much Income Tax should be taken from one’s pay or pension. The different codes can have different letters and numbers, and the employer or pension provider is told which code to use by HMRC.
It’s possible to check a person’s Income Tax online, using the “Check your Income Tax for the current year” tool on the government website.
This service covers the April 6 2019 to April 5 2020 tax year, and can let a person do things such as check their tax code and see if it’s changed, as well as find out how their tax code is worked out.
They can also see how much tax they are likely to pay.
The service enables the user to tell HMRC about a change they may have that affects their tax code.
A tax code will normally start with a number and end with a letter.
While 1250L is the tax code that is currently used for most people with one job or pension, there is a whole host of other tax codes.
What do the numbers in a tax code mean?
The numbers in a tax code tell an employer or pension provider how much tax-free income a person gets in that tax year.
First, HMRC works out one’s tax-free Personal Allowance.
The standard Personal Allowance is £12,500, but there are cases where a person may have a bigger or smaller Personal Allowance.
Income that a person has not paid tax on, and the value of any benefits from their job are then added up.
The taxable income that tax has not been paid on is then taken away from one’s Personal Allowance, with the leftover amount being the tax-free income the taxpayer is allowed in the tax year.
To determine the number for the tax code, the last digit in the tax-free income amount is then removed.
What do the letters in a tax code mean?
There are a whole host of letters which could appear in a tax code.
The letters in the tax code refer to the taxpayer’s situation, and how it affects their Personal Allowance.
The letter L means that the taxpayer is entitled to the standard tax-free Personal Allowance.
Meanwhile, M relates to the Marriage Allowance, and it means a person has received a transfer of 10 percent of their partner’s Personal Allowance.
In a tax code, N also refers to the Marriage Allowance, conveying that the taxpayer has transferred 10 percent of their Personal Allowance to their partner.