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How to read your tax code - And what to do if it’s wrong

By Meg Saksida, June 2021

Meg Saksida explains the basics of the PAYE tax code. 

By law, employers in the UK need to deduct income tax from their employees before paying them their wages and salaries through PAYE (pay as you earn). Every individual is different; some will be basic rate taxpayers, others higher or additional rate taxpayers; some will have benefits-in-kind to consider, and others will not.  

The tax code is a convenient way to inform the employer or the pension provider of how much personal allowance the employee is entitled to, in order to aid the employer or pension provider in calculating the correct amount of tax. 

Why check the tax code? 

The tax code of the individual is identified by HMRC, and in doing this, they will usually take account of any tax paid or benefits-in-kind in the previous year as an

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