HMRC has released a new online tool to help taxpayers understand what their tax code means.

Tax codes are used by HMRC to tell an employer how much income tax to withhold through the PAYE system. A person’s tax code may change based on their personal circumstances. If it does, HMRC will inform the taxpayers of their new tax code by post or through their personal tax account. 

The online tool is designed to explain a taxpayer’s tax code or why their tax code may have changed.  

To check what a tax code means, a taxpayer will need their tax code and an estimate of their annual income. Depending on their individual circumstances, they may also need details of benefits provided by their employer or their state pension amount. 

Due to gaps in information received by HMRC, a person’s tax code may over or under collect tax on their income. Issues most commonly arise where an individual has multiple jobs, starts or stops receiving a taxable benefit, or moves jobs. 

The new online tool also directs taxpayers to the relevant service to change their tax code in specific instances. More generally, if a taxpayer needs to change their tax code, they can use the Check your Income Tax online service. Unless specifically authorised by the employee, employers are not able to change their employees’ tax codes.  

The tool is newly released and HMRC welcomes feedback on user experiences of the tool. There is an invitation to provide feedback when users have reached the ‘What your tax code means’ screen at the end of the tool. 

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