The quick answer is “yes, the new Personal Allowance amount does change your tax code”. The longer answer includes the good news that you are paying less tax and why its effect on your tax code is important.
What is the new Personal Allowance amount?
The Personal Allowance amount is going up to £12,500 per year. That means that you can earn £12,500 before you need to pay any income tax at all.
So, you are essentially paying less tax because less of your income is taxable.
What has this got to do with my tax code?
Your tax code is made up of numbers and letters, each of which is saying something about your financial status. The number part of your tax code represents the amount of Personal Allowance you are entitled to.
The new tax code for basic rate taxpayers is 1250L. The 1250 means that you can earn up to £12,500 tax free. The L means that you pay Basic Rate, 20%, income tax.
When do I get my new tax code?
This 1250L tax code starts at the beginning of the new tax year, 6th April 2019 and applies right through until April 5th 2020. So you need to check your April pay slip to make sure its correct.
Why does this matter to me?
Your tax code is important because it defines how much tax you pay to HMRC. As we are all personally responsible for paying the correct amount of tax, you need to check that your tax code is correct. If you don’t know what it’s supposed to be, or how to decode it, you can’t work out if it’s right.
Why have I got other letters on my tax code?
All the letters of your tax code mean something. Here a few of the most common:
S – An ‘S’ at the start of the code means that you are a Scottish taxpayer
C – A ‘C’ at the start denotes that you are a Welsh taxpayer
OT – This means that you do not get any Personal Allowance because you earn over the threshold.
If you’re not sure about your tax status or if your tax code is correct, make it a priority to find out. You can find out more information from Tax Banana, or you can call HMRC. The sooner you check, the quicker any problems can be sorted out. The last thing you want is to discover that you owe HMRC for a year’s worth of underpaid tax.