Everyone that works in the UK has a tax code. Your tax code reflects any allowance that you are entitled to or any benefits that you are given, such as a company car. If you know how your tax code works you can easily see if you are paying the correct amount of tax and avoid having to pay any tax back… you may even be due a tax rebate!
What does Tax Code 653L mean?
Most tax codes work in the same way. Take the number from the tax code, in this case ‘653’ and multiple by 10:
653 x 10 = £6530.
This is your tax allowance, the amount that you can earn before you need to pay any tax.
How does the tax code work
Your tax code lets your employer know how much of a tax allowance you have. Instead of giving you this allowance in one lump sum, your employer will evenly distribute in your pay each month.
Why has my tax code changed
Often the Inland Revenue changes the tax free allowance. Usually, each year it increases so that you can earn more before you need to pay any tax. Because of this change in the tax allowance you may see a change to your tax code.
If you stop working part way through the tax year you may not receive your full tax free allowance. If this happens you can claim a tax rebate from the Inland Revenue.