PAYE Coding Notice- What does my code mean?

Your employee tax code is used by your employer to calculate the amount of income tax that must be withheld or deducted from your salary.

The significant part of your code is the number
The number indicates to the employer how much of your earnings are "tax free". For example if your code is 647 this shows what your tax free allowance for the given year is £6475, if your code was 728 you fax free allowance would be £7285.

The standard personal tax allowance for a year is £6475. If your allowance is over this amount it is likely to be because you are entitled to another tax allowance, or you have simply over paid tax in an earlier year.
If you allowance is less than £6475 then it may be that you owe tax from a previous year.

If your tax code starts with a letter then the letter is important.

BR codes indicates that you must pay basic rate (20%) on all your earnings. This code is often used when you have two jobs, you are likely to take your whole tax free allowance on one of the jobs and pay basic rate on all of your earnings from your second job.

NT codes mean you pay No Tax, this is only used in exceptional circumstances. Students at university will have a NT code when they work during their summer holidays.

K codes are a little more complex....

A negative PAYE code, or "K" code, means your personal allowances for the tax year are less than untaxed income and benefits which have been included in the code. Your employer or pension provider will add the negative figure from this code to your annual income rather than deducting it, as they would with a normal PAYE code. However, please check that all your allowances are included in the code. If you are married and were born before 6 April 1935 you may be due a married couple’s allowance. In some cases the married couples" allowance has been missed from PAYE codes issued since 1 July 2009. If this applies to you, ring the Tax Office number shown on your code notice, or ask us to check your code for you.

If you have any queries regarding your tax code you can find more information on the HMRC wesbite

Also dont forget to double check your tax codes as HMRC had problems when issuing codes this year and people have recieved two coding notices, check out their website for more information!

Flipping Houses

If you own and occupy more than one property as your home you can elect, within a set time period, for one of those properties to be your main home for tax purposes. You can change this election at any time so another property qualifies as your main home, hence the term 'flipping'. When you sell your main home the increase in value that has built up while it was your main home, and for the last three years of ownership, is free of capital gains tax.

Three years of the ownership period will be free of tax, even if the property has only been designated as your main home for a very short period, perhaps only a week. This is the tax rule many MPs used to avoid paying tax on the home that had been largely funded by their expense claims.

You can flip your properties just like an MP, if you make the first election within two years of acquiring another residence, or within two years of marrying (or civil partnership). If you have missed this deadline on your current properties it may be worth acquiring a very small third property to give you the option to make the election again.

However, beware that the law in this area could be changed with little advance notice following the MP's scandal.