UK Tax Codes Explained, Br Basic Rate Tax Coding and New Tax Code

Virtually everyone in the UK is entitled to a personaltax code means basic rate where the employee
allowance if they are resident in the UK which entitlesentire earnings are taxed at the basic tax rate. The
them to tax free income, the amount of that tax freeBR tax code is often used when an employee has a
income being dependent on the size of the personalsecond job and should also be applied by an employer
allowance according to the specific circumstances.who has not received a P45 or P46 for a new
Earnings above the tax free allowance are subject toemployee. The NT tax codes explained is that no tax
the basic rate tax. The basic tax rate personalis deducted from the employee so the basic rate tax
allowance was £5435 from 6 April 2008 anddoes not apply..
increased by £600 to £6,035 which effect fromHMRC are responsible for issuing tax codes and
the first pay date after 7 September 2008. The originaldetermine the Inland Revenue tax code by giving
personal allowance tax code 543L being increased toeveryone the personal allowance, deducting any
new tax code 603L reflecting these changes toearnings where tax remains unpaid from the previous
calculate tax at the new rate from 7 September 2008..year and dividing the result by 10. Variations to this
Basic rate tax for 2008 is 20 percent. For earningscalculation are when other factors affect the tax
above the higher income threshold which is £34.800code.
the basic rate tax increases to 40 per cent.An emergency tax code is issued to calculate tax
The personal allowance of people over 65 and up towhen the new tax code is not immediately available.
74 is £9,030 which is reduced if income exceedsThat can occur when the employee does not have a
£21,800 and people over 75 receive a personalP45 or completes a P46. The emergency tax code
allowance of £9,180 also reduced when income543L is replaced with the new tax code 603L from 7
exceeds the £21,800 income threshold. The rate ofSeptember 2008 which is the basic tax allowance but
tax allowance reduction is £1 for every £2 aboveis also applied on a week one or month one basis. A
the income threshold until the basic personal allowanceweek one or month one basis means the employer
is reached.will calculate tax to be deducted for each pay period
The number in the UK tax code is known as the prefixand not on a cumulative basis which in effect prevents
while the letter following that number is known as thetax refunds until a confirmed tax code is received to
suffix. Each suffix letter in the tax codes explained asreplace the emergency tax code..
a different meaning.It is important for employers to use the correct UK tax
Letter L means eligible for the basic personalcode which is stated on the P45 an employee
allowance and is also used for the emergency taxpresents to the new employer when starting
codes. Letter P is for people aged 65 to 74 and letteremployment to deduct the correct rate of tax. If the
V for people aged 75 and over, while letter Y is alsonew employee does not have a P45 for the current
for people over 75 but who are eligible for the fullfinancial year then the employer should request the
personal allowance. A tax code with a suffix letter Temployee complete a P46. The P46 is sent to HMRC
indicates there may be issues that HMRC still need towho then review the tax coding and issue an
review regarding the tax code and letter K indicatesappropriate tax code for the employer to use.
that the value of taxable benefits exceeds theThe personal allowance usually changes each new
personal allowance.tax year and the old Inland Revenue tax codes from
Where untaxed incomes, such as benefits, arethe previous year can be used for the first few
received by the employee exceed the personalweeks of the year and replaced with the new tax
allowance a K code is issued by HMRC. The numbercode in week 7. The rate of tax deducted if the
following the letter K indicates the amount of benefitsprevious year personal tax allowance has been
multiplied by 10 that are to be taxed in addition to theincreased is common and the employee receives a
gross earnings received. This is achieved by addingtax refund when the new tax code is applied.
the K code number multiplied by 10 to the grossWhen the new tax code is known from the start of
earnings of the employee for income tax purposes.the new tax year the tax coding can be applied from
Some Inland Revenue tax coding consists of justweek one and as the correct tax has been deducted
letters allowing the tax codes explained simply. The BRno refund is due.