What is the 2021/22 PAYE tax code? 

Final details to the Pay-As-You-Earn (PAYE) tax code will be confirmed by the Chancellor in his budget of 3 March 2021. HMRC have released details of the proposed PAYE codes for 2021/22 as follows.

  • The basic PAYE tax code is set at 1257L for employees. This gives an employee a personal allowance of £12,570 for the year. This is a £70 increase on 2020/21 and worth £14 to a basic rate taxpayer.
  • £12,570 is also called the 'emergency code'.
  • Employees who earn more than £125,140 receive no personal allowance and should be on an 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 in excess of £100,000.
  • Employees who have claimed the Marriage allowance, by virtue of a low-earning spouse, have a PAYE code with a suffix of M. Those who surrender the allowance have a suffix of N.

Employees who are Scottish Taxpayers have the prefix S. The higher rate threshold in Scotland is £43,663 in 2021/22 (£43,430 in 2020/21), compared to £50,270 (£50,000 in 2020/21) in the rest of the UK.

Employees who are Welsh Taxpayers have the prefix C. The higher rate threshold in Wales is the same at that for the rest of the UK at £50,000.

What tax code do I use for 2021/22?

If the employee is a starter or casual worker complete the Starter Checklist.

Otherwise use 1257L for employees unless:

  • Notification of a different code is advised by HMRC.
  • 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.

It is advisable to double-check with HMRC and if in doubt check online or phone the tax office.

Do not carry forward any week one or month one adjustments.

What is the 'emergency' tax code for 2020/21?

  • 1257L is the default code. Codes may then be suffixed with W1 (weekly pay), M1 (monthly pay) or X.

What is code ending in OT?

This means that the employee has not been given any allowances against tax. This is most likely because the employer has probably not been given the employee's starting information, they are is a casual worker or earn over £125,140.

How do I check my tax code?

It is said that less than 80% of employees bother to check their PAYE code. It is foolish not to check it, as it won't bite you.

  • If your code is lower or higher than expected you need to find out why.
  • It may have been adjusted by HMRC to code out underpayments of tax in previous tax years, see PAYE collection of tax debts. 
  • 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. 
  • COVID-19: home-working? Have you claimed your Working from home allowance?
  • If your taxable benefits are not adjusted for on your PAYE code it may be that there is an error or your employer may be payrolling your benefits. Check with your employee first.
  • If you fail to check your code you may pay the wrong amount of tax. Do not rely on HMRC to provide you with the correct code.

See How to check your PAYE code.

Pensioners

Pensioners no longer qualify for any additional age allowance.

Married pensioners over 83 (born before 6 April 1935) may receive the married couples allowance adding up to 891 to their tax code.


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