On 6 April 2016, the tax codes in the UK changed to reflect an increase in the Personal Allowance.
For millions of UK taxpayers their tax code will have changed to 1100L. This is the tax code that applies to most people who receive the full tax-free Personal Allowance and have no deductions. it is also the emergency tax code in the 2016/17 tax year.
Our guide looks at everything you need to know about the new 2016 tax code. Keep reading to find out more.
Your personal allowance
Every year, you are allowed to earn a certain amount of money before you start to pay tax. In the 2016/17 the Personal Allowance increased from £10,600 (in the 2015/16 tax year) to £11,000. This means that most people can earn £11,000 before they start to pay any income tax.
If your tax code features numbers and then the letter ‘L’ it means that you are eligible for the basic Personal Allowance (£11,000) in the 2016-17 tax year and you were born after 5 April 1938.
Working out your tax code
There are three steps to working out your tax code:
- Total up your tax allowances – these will most often be just the basic Personal Allowance of £11,000 although you may also have age related allowances or a Blind Person’s Allowance
- Total up untaxed income (‘deductions’) – this may include income from a second job, part-time employment, employer-provided benefits or untaxed savings interest. These deductions should be taken away from your allowances
- Divide this number by ten and add the letter that fits your circumstances. This will generally be L but could be M or N if you’ve transferred some Marriage Allowance or Y if you were born before 5 April 1938.
A 1100L tax code means that you are eligible for the basic Personal Allowance (£11,000) and that you have no deductions to take into account.
1100L is also the emergency tax code in the 2016-17 tax year
In some cases, HMRC may not have sufficient information about your income to provide your employer or pension provider with a correct tax code. In this situation, they will issue an ‘emergency tax code’ and this is used on a temporary basis while HMRC work out 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 (£11,000 in tax year 2016-17). However, it doesn’t take any other allowances into account and so you may pay too much tax.
The emergency tax code is set each year by HMRC and is a number followed by the letter ‘L’. In the 2016/17 tax year, the emergency tax code is 1100L.
Remember that having the 1100Ltax code doesn’t automatically mean you are on an emergency tax code. For example, you could be eligible for the basic Personal Allowance and have no deductions.