April, 2014

1000L – Everything You Need To Know About Your Tax Code 2014/2015

Are you one of the millions of people whose tax code for 2014/2015 is 1000L? If you pay your tax through PAYE and you receive the full tax free Personal Allowance, this may well be your tax code for the 2014/2015 tax year. 1000L is also the ‘emergency tax code’ for the 2014/2015 tax year. Watch the following 2 minute video and read this article to find out everything you need to know about the 1000L tax code

The 1000 in your tax code

Your Personal Allowance is the amount of money you’re allowed to earn each year before you pay tax.  On April 6, 2014 the Personal Allowance increased from £9,440 to £10,000. This means that most people can earn £10,000 before they start to pay any income tax.

The number in your tax code helps you to work out what your Personal Allowance is. You simply multiply the number on your tax code by 10.

In the 2014/2015 tax year, many people will have the tax code 1000L. This means you can earn £10,000 – the basic Personal Allowance – before you have to pay any income tax.

‘L’ tax codes

If your tax code features numbers and then the letter ‘L’ it means that you are eligible for the basic Personal Allowance (£10,000) in the 2014/2015 tax year. Your tax code may be 1000L.

If your tax code ends in the letter ‘P’ it means that you are between the age of 65 and 74 and you are eligible for the full Personal Allowance (tax code 1000P). If your tax code ends in ‘Y’ it means that you are over the age of 75 and you are eligible for the full Personal Allowance (tax code 1000Y).

Why 1000L may be your ‘emergency’ tax code

If HMRC doesn’t have sufficient information about your income, they may issue your employer or pension provider with an ‘emergency tax code’.  An emergency tax code is used on a temporary basis while HMRC establish what your correct tax code should be.

If you have an emergency tax code it will ensure that you receive the basic tax free Personal Allowance (£10,000 in tax year 2014/2015).  However, it doesn’t take any other allowances into account.

The emergency tax code is set each year by HMRC and is a number followed by the letter ‘L’.  In the 2014/2015 tax year, the emergency tax code is 1000L.

However, if you have the 1000L tax code it doesn’t mean you are on an emergency tax code. For example, if you are eligible for the basic Personal Allowance and have no deductions you may have the same tax code.

Tax Code 1000L

52 Ways To Save Tax #1

Here’s your first part of a brand new series outlining 52 ways in which you can save tax. For the first part we look at a problem that results in millions of people paying too much tax: being on the wrong tax code.

1. Get Your Tax Code Right

Tax Codes phone tax formIf you pay any income tax via the Pay as You Earn (PAYE) system then you will have a tax code. Your tax code tells your employer or pension provider how much income tax to deduct from your earnings.

HMRC issues your tax code based on information they have about your taxable income and allowances. So, if the information they have is wrong, you could be paying too much tax.

Getting the right tax code could save you a fortune in tax. Keep reading to find out more.

How to save tax by getting your Tax Code right

In many cases your tax code will be based on information HMRC has about the previous tax year. For example, if you had untaxed income such as rental income or a second job HMRC will try and collect the tax due on these earnings through your tax code.

However, if your income from such sources has fallen, HMRC may still be basing the tax you pay on the figures from the previous tax year. This means you could be paying too much income tax.

To make sure you pay the right amount of tax you should tell HMRC if you:

  • get married or form a civil partnership
  • start receiving a second or third income
  • Start receiving taxable benefits such as private medical insurance or a company car
  • Become or stop being self employed

You should also let HMRC know if other income that you get – such as savings or rental income – increases or reduces.

If you pay tax through PAYE but don’t normally complete a tax return you should contact HMRC with details of the changes to your income. HMRC may be able to change your tax code so that you pay the right amount of tax. If they do this you will receive a PAYE Coding Notice explaining the changes to your code.

However in some cases HMRC may ask you to complete a tax return and pay any extra tax through Self Assessment. HMRC will write and let you know if they need you to complete a tax return.

If your taxable income has gone down you may be due a refund.