Tax codes, bands and rates for England and Northern Ireland

The tax codes, bands and rates used in Sage 50 Payroll for payrolls in England and Northern Ireland.

Tax codes, bands and rates are a fundamental part of employee's tax calculations.

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Tax code letters

• L - Entitled to the standard tax-free personal allowance, for example 1257L
• BR - All income taxed at basic rate with no free pay allowance. An employee may receive this tax code for a second job
  
  NOTE:

  The BR code ignores the pence on taxable gross pay. For example, with taxable earnings of £250.75, tax calculates on £250 giving a tax due value of £50 not £50.15.

• NT - No tax. Only use these codes if HMRC instructs you to do so
• D0 - All income taxed at higher rate. This is D zero, rather than DO
• D1 - All income taxed at additional rate
• 0T - This is zero T, rather than OT. No free pay allowance. There's no personal allowance to use, or you don't have the details you need to give the employee a tax code

  K code - The prefix K, for example K100, means that the pay adjustment will be add to the taxable pay, rather than subtracted. This increases the amount of the employee's taxable pay, compared to their actual pay. You'll often use this code for directors and employees whose additional benefits outweigh their personal allowance, for example, company cars, BUPA etc

  • If HMRC issues you a K0 code, enter the tax code K1 in Sage 50 Payroll

• M suffix - The employee has an increased personal allowance as part of Marriage Allowance legislation
• N suffix - The employee has a decreased personal allowance as part of Marriage Allowance legislation
• T suffix - This applies if any items of a tax code are under review by HMRC

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Bands and rates

The table shows the UK Income Tax rates an employee pays in each band. The personal allowance of tax free pay is built into these figures, as per HMRC's guidance.

Band	Taxable income	UK tax rate (%)
Basic rate	£0.01 to £37,700.00	20%
Higher rate	£37,700.01 to £125,140.00	40%
Additional rate	Above £125,140.01	45%