How to Calculate Tax Codes

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Tax codes may seem like a jumble of letters and numbers but they are actually surprisingly straightforward. Most of the time, a code will look something like this: 170L. The number is one tenth of the amount you can make before you need to pay taxes, 170 means £1700. The letter is a special code that signifies your tax and deduction status. Because of their relative simplicity, it isn't hard to calculate your own codes.

Things You'll Need

  • Tax information
  • Income records
  • Add up all of your tax allowances.

  • Total all income that hasn't been taxed and any taxable non-income.

  • Subtract the total of step two from the total of step one; this is your total tax-free income.

  • Divide your tax-free income by 10 and drop any remainder, this becomes the number part of your tax code.

  • Find the letter part of your tax code by assessing your personal situation. Most people in normal situations are L but older people are P,V or Y and many small business owners are BR.

Tips & Warnings

  • Consult a tax guide to verify the letter part of your code, the number part is easy but the letter can be tricky.

References

  • Photo Credit tax defined image by Christopher Walker from Fotolia.com
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