PAYE Code for 2024/2025

PAYE Code for 2024/2025

With the new tax year fast approaching, we sat down with our Tax Expert and Director Rachael Ball to discuss all thing PAYE.

What is the 2024-25 PAYE tax code?

The standard PAYE tax code for employees stands at 1257C, granting them a yearly personal allowance of £12,570. There have been no changes from last year.

The PAYE codes for 2024-25 are outlined below.

  • 1257C is known as the ’emergency code’ when used on a non-cumulative basis.
  • 1257C is the most common tax code for employees with one job or a pension.
  • The “C” suffix indicates that the individual is eligible for the standard personal allowance.
  • Employees who earn more than £125,140 receive no personal allowance and should be on a 0T tax code (see below).
  • Employees who earn between £100,000 and £125,140 have their personal allowance tapered away. It is reduced by £1 for every £2 more than £100,000.
  • Employees who have claimed the Marriage allowance, by virtue of a low-earning spouse or civil partner, have a PAYE code with a suffix of M. Those who surrender the allowance have a suffix of N.

Employees who are Welsh Taxpayers have the prefix C. The higher rate threshold in Wales is the same as that for England and Northern Ireland at £50,270.

What tax code do I use for 2024-25?

What do the different types of tax code suffixes mean?

If the employee is a starter or casual worker complete, you should complete your company’s starter checklist.

Use the standard tax code of 1257C unless:

  • Notification of a different code is advised by HMRC on form P9(T)
  • The employee’s code was not the basic code last year, in which case expect the code to be the same as last year unless otherwise notified by HMRC.
  • Do not carry forward any W1/M1 from a 2023-24 code.

What is the ’emergency’ tax code for 2024-25?

  • 1257C is the default code.
  • Codes can be followed by W1 (for weekly pay), M1 (for monthly pay), or X (for weekly, monthly, or non-standard pay periods).
  • The codes are non-cumulative, with tax being calculated only for the specific period.

What is the code ending in 0T?

This shows that the employee has not received any tax allowances. This situation may occur if the employer hasn’t received the employee’s initial information, if the employee is a casual worker, or if their earnings exceed £125,140 (beyond the personal allowance limit).

Code 0T does not apply tax at a flat rate (like codes BR, D0 and D1, below). Code 0T takes account of the basic, higher, and additional rate bands meaning that some tax may be paid at 40% and 45%, as well as 20%, depending on the level of earnings.

Code 0T does not impose a flat tax rate as seen with codes BR, D0, and D1. Instead, Code 0T considers the basic, higher, and additional rate bands, resulting in potential tax payments at 20%, 40%, and 45% based on the earnings level.

What are some of the other letters I may see?

BR – All income from this income stream is taxed at the basic rate.

D0 – All income from this income stream is taxed at the higher rate.

D1 – All income from this income stream is taxed at the additional rate.

K – There is more income to be taxed (usually Benefits In Kind) and this is more than the personal allowance (this is effectively a negative tax code).

NT – There is no tax to pay on this income stream.

T – Other calculations have been included to work out the personal allowance available.

Why should I check my tax code?

It’s been noted that fewer than 80% of employees take the time to review their PAYE code. It’s unwise to neglect this task, as it won’t cause any harm.

What are some of the reasons why my tax code could change?

  • If your code is lower or higher than you thought, you need to find out why.
  • The code may have been changed due to overpayment or underpayment to HMRC.
  • If you receive any benefits from employment or do more than one job, or receive investment income and are a higher-rate taxpayer you should find that your PAYE code is restricted in some way.
  • Have you claimed your working from home allowance?
  • Have HMRC considered tax relief for any other employment expenses claimed?
  • If you neglect to review your code, you might end up paying an incorrect amount of tax. It’s not advisable to depend on HMRC to supply you with the accurate code.
  • HMRC has introduced an interactive tool to assist taxpayers in reviewing and comprehending their tax codes. The tool also offers instructions on how to request a change to your code if you believe it is inaccurate.

Rachael Ball, LHP Accountants

Talk to your Tax Expert today.

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