Introduction to Income Tax and NICs Pay As You Earn and income tax
5.7.5 The relevance of the numeric part of a tax code
The numeric part of a tax code that has a suffix or a prefix K, SK or CK broadly indicates the amount of pay adjustment (tax-free pay or additional pay) for that employee in the tax year. The pay adjustment is often the amount of the person’s Personal Allowance.
Tax codes with a suffix
To convert the Personal Allowance of a tax code with a suffix, drop the last digit.
Example 2 An employee’s Personal Allowance is £8,565. Dropping the last digit gives a numeric value of 856.
So, for example, a numeric value of 1,257 in a tax code with a suffix means that the employee is entitled to a positive pay adjustment between £12,570 and £12,579. In fact, the way tax is calculated under PAYE means that the actual pay adjustment would be the latter (£12,579).
Tax codes with a prefix K or SK
HMRC issues a tax code with a prefix K or SK if, for example, the employee’s total taxable benefits exceed the employee’s Personal Allowance.
After deducting the Personal Allowance from the total taxable benefits, the value is converted to a prefix K, SK or CK tax code by:
Dropping the last digit; and
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Subtracting ‘1’ from the remainder.
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Example 3 An employee’s taxable benefits are £ 12,870 and the employee’s Personal Allowance is £12,570. 12,870 minus 12,570 gives 300 Dropping the last digit gives 30 Subtracting 1 gives a numeric value of 29 A tax code of K29 is produced. If the individual were a Scottish or Welsh taxpayer, the tax code would be SK29 or CK29.
For example, a numeric value of 29 in a prefix K tax code means that the additional pay is between £290 and £299. In fact, the way tax is calculated under PAYE means that the actual additional pay would be the latter (£299).
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