The letters in your tax code indicate whether you are entitled to the annual tax-free personal allowance. These codes are updated each year and help employers calculate how much tax should be deducted from your salary.

For the current tax year, the basic personal allowance is £12,570. The tax code corresponding to this amount is 1257L, which is the most common tax code used for those with a single job, no untaxed income, and no unpaid tax or taxable benefits (such as a company car).

HMRC updates your tax code when your circumstances change, and your taxable income is affected. Some common reasons why your tax code may change include:

• Starting a new job. If you begin working for a new employer, HMRC may issue a new tax code based on your earnings, especially if they haven’t yet received your full income details.
• Receiving taxable state benefits. Certain state benefits are taxable. If you start receiving them, HMRC may adjust your tax code to account for the additional income.
• Taking on an additional job or receiving a pension. If you begin earning from another job or start drawing a pension, your tax code may be updated to reflect this extra income.
• A change to your weekly State Pension amount. If your weekly State Pension payments change, HMRC may revise your tax code to ensure the right amount of tax is collected.
• Changes to job-related benefits. If your employer informs HMRC that you have started or stopped receiving benefits like a company car or private healthcare, your tax code will likely change to reflect this.
• Claiming Marriage Allowance. If you transfer part of your Personal Allowance to your spouse or civil partner, or they transfer it to you, HMRC will adjust your code to reflect the change in allowances.
• Claiming tax-deductible expenses. If you claim tax relief on work-related expenses (like uniforms, tools, or mileage), your code might change to reduce the tax you pay during the year.

It is important to check your tax code is correct. If you have any questions, we would be happy to help.

Income Tax applies to earnings, pensions, savings, dividends and more, with different bands across the UK nations.

Individuals can be liable to Income Tax at any age. There are special rules to stop parents avoiding tax by putting assets into their children’s names.

The tables below shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.

If you earn over £100,000 in any tax year your personal allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000 irrespective of age. This means that any taxable receipt that takes your income over £100,000 will result in a reduction in personal tax allowances. This means your personal Income Tax allowance would be reduced to zero if your adjusted net income is £125,140 or above.

For the current tax year if your adjusted net income is likely to fall between £100,000 and £125,140 you would pay an effective marginal rate of tax of 60% as your £12,570 tax-free personal allowance is gradually withdrawn.

If your income sits within this band you should consider what financial planning opportunities are available in order to avoid this personal allowance trap by trying to reduce your income below to £100,000.

From April 2026, the self-employed and landlords must use MTD for IT, but exemptions may apply in limited cases.

If you are self-employed or a landlord with income over £50,000, you will need to prepare for digital record keeping, quarterly updates and a new penalty system. While most affected taxpayers will be required to comply, there are limited exemptions available.

You can apply for an exemption if you believe you are digitally excluded. HMRC will consider applications on a case-by-case basis once the process opens.

You may be eligible if:

• it is not practical for you to use software to keep or submit digital records – this could be due to age, disability, location, or another reason; or
• you are a practising member of a religious society or order whose beliefs are incompatible with electronic communication and digital record keeping.

In addition, if HMRC has already confirmed that you are exempt from Making Tax Digital for VAT, you will need to contact them again once the MTD for IT application process opens. HMRC will then review your exemption. If your circumstances remain the same then HMRC will confirm you are also exempt from MTD for IT. If not, you will need to reapply.

Some taxpayers are automatically exempt from MTD for IT and do not need to apply.

These include:

• trustees, including charitable trustees and trustees of non-registered pension schemes
• individuals without a National Insurance number, applicable only if one is not held by 31 January before the start of the tax year
• personal representatives of someone who has died
• Lloyd’s member, in relation to your underwriting business 
• non-resident companies

If you are automatically exempt, you do not need to apply for an exemption. If you do not use MTD for IT, you must continue to report your income and gains by submitting a self-assessment tax return if required.

If you cannot pay your tax bill, it’s crucial to contact HMRC as soon as possible. They may offer support through a Time to Pay arrangement, allowing you to repay your debt in instalments based on your financial situation. Ignoring the debt can lead to enforcement action, including visits to your home or business by HMRC or the use of debt collection agencies. The debt collection agencies are regulated by the Financial Conduct Authority and will only contact you by letter, phone, or SMS. They will not visit you in person at your home or place of work.

If these measures to do not work, HMRC can recover the debt using more serious measures. These include taking control of your possessions, recovering money directly from your bank account, adjusting your tax code or using court action. HMRC may also pursue debt through charging orders, deductions from wages or pensions or third-party debt orders.

If all else fails, insolvency proceedings may be started, including bankruptcy or winding-up orders. HMRC also has international recovery agreements that allow foreign tax authorities to collect UK tax debts if you live or have assets abroad.

If you are affected by any of these issues, please let us know so we can help you.

HMRC’s Time to Pay lets eligible taxpayers spread tax bills over time, avoiding immediate enforcement. 

If you owe tax to HMRC, you may be able to set up an online ‘Time to Pay’ payment plan depending on the type of tax debt and your circumstances. For self-assessment, you can create a payment plan online if you’ve filed your latest tax return, owe £30,000 or less, are within 60 days of the deadline and have no other debts or payment plans with HMRC.

For employers’ PAYE contributions, online payment plans are available if you’ve missed a payment deadline, owe £100,000 or less, aim to repay within 12 months and have no other debts with HMRC. Additionally, all due PAYE and Construction Industry Scheme (CIS) submissions must be filed.

If you owe VAT, you could set up a payment plan online if you missed the deadline, owe £100,000 or less, intend to pay within 12 months, have filed all tax returns and the debt relates to an accounting period starting in 2023 or later. Businesses on the Cash Accounting Scheme, Annual Accounting Scheme or those making payments on account are not eligible to set up a plan online.

For Simple Assessment debts, online payment plans are possible if you owe between £32 and £50,000, have no other debts with HMRC, and can pay it off within 36 months.

If you are not eligible for an online plan, you must contact HMRC directly. They will ask for details about your income, expenses, other tax liabilities, and any savings or assets, which they may expect you to use toward your debt.

HMRC will offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full but will be able to pay in the future. If HMRC do not think that more time will help, then they can require immediate payment of a tax bill and start enforcement action if payment is not forthcoming.