Published On: Tue, Aug 27th, 2019

Is tax code 1250L right for you in 2019? How to check if tax code from HMRC is correct | Personal Finance | Finance

Income Tax usually applies to taxable income which is greater than a person’s tax-free Personal Allowance. In the 2019 to 2020 tax year, the standard allowance is £12,500. However, there are a number of reasons as to why a person may have a reduced or greater tax-free Personal Allowance. For instance, if a couple has claimed the Marriage Allowance, the lower-earning partner will transfer 10 per cent of their Personal Allowance to their other half. Another reason why a person may have a different Personal Allowance is if they have a high income.

Those who have a taxable income of more than £100,000 each tax year will see their Personal Allowance be reduced.

This is by £1 for every £2 that their adjusted net income is above £100,000.

Should a person have an annual income of £125,000 or more, their allowance would therefore be zero.

The tax code 1250L is currently the most common tax code.

It is used for most people who have one job or pension.

The letter L means that the taxpayer is entitled to the standard tax-free Personal Allowance.

So, where do the numbers in this particular tax code arise from?

The website explains how the numbers are worked out.

First, HM Revenue and Customs (HMRC) works out one’s tax-free Personal Allowance.

It then considers income on which a person has not paid tax on, such as untaxed interest or part-time earnings, in addition to the value of any benefits from one’s job – such as a company car, and these are added up.

The income which a person has not paid tax on is then taken away from the taxpayer’s Personal Allowance.

What is left is the tax-free income that the individual is allowed in that tax year.

The final step is the last digit of this figure is removed.

As such, the tax code 1250L means that the taxpayer is entitled to the standard tax-free Personal Allowance, with £12,500 worth of tax-free income being allowed in that tax year. details what other tax code letters mean.

This includes the tax code letters BR, which mean that all income from this job or pension is taxed at the basic rate.

This is usually use if the taxpayer has got more than one job or pension.

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