People due payslips near end of month urged to check two key details have been applied by employer

Millions of workers due to receive their monthly payslip over the next few days are being urged to check two key details have been changed to ensure they are being paid the correct amount by their employer. The start of the 2024/25 financial year on April 6 means that tax codes may change for some people, especially those on the Blind Person’s Allowance (BPA).

While the Personal Allowance remains frozen at £12,570 this year, the BPA will increase from £2,870 to £3,070 - a boost of £200. This means the 2024/25 tax allowance for people who are registered as blind or severely sight impaired is £15,640 and their tax code will change from 1544 to 1564, however, most people will have the 1257L tax code for the year ahead.

People in Scotland may also see significant changes to deductions in their April payslips due to the additional Scottish tax bands and the cut to National Insurance contributions.

Around 27 million people will also see less class 1 National Insurance (NI) deductions taken from their payslips this month, after the rate fell from 10 per cent to 8 per cent on April 6. It’s important to compare your deductions in April with March to ensure that the change has been applied.

The Scottish Government is also urging people to check that the tax code on their first payslip of the new 2024/25 financial year is correct. People paying Scottish income tax should have a tax code that begins with an ‘S’.

Changes to the Scottish income tax system are now in place and are expected to raise “valuable revenue for investing in public services,” according to Deputy First Minister Shona Robison. The tax rates for earnings between £12,571 - £14,876 (19%), £14,877 - £26,561 (20%) and £26,562 - £43,662 (21%), will remain the same.

However, earnings between £43,663 - £75,000 are now taxed at the Higher tax rate of 42 per cent. The threshold at which people pay the Top Rate of tax has reduced from £150,000 to £125,140 with earnings over that threshold now taxed at 48 per cent.

A new Advanced income tax band will apply a 45 per cent rate on annual income between £75,000 and £125,140, while an additional one pence will be added to the Top rate of tax meaning income over £125,140 will be taxed at 48 per cent.

The independent Scottish Fiscal Commission estimates that overall income tax will raise £18.8 billion in 2024-25.

Scottish income tax thresholds

The table below shows the 2024/25 Scottish Income Tax rates you pay in each band if you have a standard Personal Allowance of £12,570. You do not get a Personal Allowance if you earn over £125,140.

Tax thresholds in England and Wales 2024/25

How to check your tax code

The easiest way to do this is to look at your payslip. One you have a note of your Personal Allowance tax code, you can go to the GOV.UK website and use the online “Check your Income Tax for the current year" service. This tool, which covers the current tax year, can be used to check your tax code and Personal Allowance, and to see if a tax code has changed.

Other options available through this online service include allowing people to see an estimate of how much tax they will pay over the whole tax year. However, the service cannot be used by self-employed workers. The GOV.UK website explains: "You cannot use this service if Self Assessment is the only way you pay Income Tax.”

What the tax code numbers mean

The numbers in an employee’s tax code show how much tax-free income they get in that tax year, this is known as your Personal Allowance. You usually multiply the number in the tax code by 10 to get the total amount of income they can earn before being taxed.

For example, an employee with the tax code 1257L can earn £12,570 before being taxed. If they earn £30,000 per year, taxable income is £17,430 (£30,000 - £12,570).

What the letters mean

Letters in an employee’s tax code refer to their situation and how it affects their Personal Allowance. The full list of tax code letters and what they mean can be found on the UK.Gov website here.

Most commonly used letters:

• L - For an employee entitled to the standard tax-free Personal Allowance

• S - For an employee whose main home is in Scotland

• BR/ SBR - For a second job or pension

• M - For an employee whose spouse or civil partner has transferred some of their Personal Allowance

• N - For an employee who has transferred some of their Personal Allowance to their spouse or civil partner

• T - When HMRC needs to review some items with the employee

If your tax code has ‘W1’ or ‘M1’ at the end

W1 (week 1) and M1 (month 1) are emergency tax codes and appear at the end of an employee’s tax code, for example ‘577L W1’ or ‘577L M1’.

The tax code letter ‘K’ is used when deductions due for company benefits, State Pension or tax owed from previous years are greater than their Personal Allowance.

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