If your payslip shows the 1185l tax code, then you’re on one of the most commonly used tax codes for 2018. In this guide, I’ll explain more about this code, including what it means, why it’s used and how to check it’s right for you.
What is a Tax Code?
HMRC have to issue it because they have all the information on your personal income and any deductions they need to take from you, meaning you can keep things confidential from your employer.
Your tax code lasts for one tax year* so both you and your employer will most likely receive a coding notice before the start of a new tax year. You and your employer may also receive a letter from HMRC to change your tax code if required, for example, if you are claiming the marriage allowance tax rebate or are self-employed or need to pay the £50,000 high-income tax charge and want to pay your tax through your PAYE tax code.
* A tax year runs from the 6 April to 5 April each year and the tax code for 2020/2021 is 1250L
1185l Tax Code
The tax code 1185L is given to people with one job and no work benefits like a company car or have one pension.
Every year, all UK residents are entitled to earn an amount tax-free known as a personal allowance. For the 2018/2019 tax year this is £11,850. After this, you’ll pay income tax at 20% on your earnings up to £46,350 and 40% over that amount, until you reach £150,000 and have to pay 45%.
For the purposes of tax coding, HMRC removes the last digit and replaces it with a letter. In this case, the letter “L” has been used which means you’re entitled to the standard tax-free Personal Allowance.
Cumulative Tax Codes
The 1185L tax code is a cumulative code. That means you’ll receive a portion of your personal allowance every time you get paid. For example, if you are paid monthly, you’ll receive £987.59 (£11,850 ÷ 12) tax-free each month you get paid. That way by the end of the tax year, you’ll have received your personal allowance in full.
If you took a few months of work and had no other job during the tax year, you’ll receive all the personal allowance you are owed in your first payslip if you start a new job. Your employer will know what code to use when you give them your P45.
If your tax code ends W1 (week 1), M1 (month 1) or X, then you have been put on a non-cumulative or emergency tax code.
1185 W1, 1185 M1, 1185 X
If your tax code ends with the letter W1, M1 or X, then you’ve been put on an emergency tax code. This normally happens if you:
- start a new job and not provided a P45
- begin working for an employer after you’ve stopped self-employment
- receive company benefits, like a company car
- receiving the State Pension
Although emergency tax codes are temporary while the necessary information is put together, it does mean you’ll pay tax on all your income above the personal allowance and not receive any backlog of personal allowance you may be entitled to but haven’t used.
If you end the tax year on an emergency tax code, HMRC will add up how much tax you have paid and work out whether you owe anything at the end of the tax year.
They will then send you a notification letter called a P800 detailing what you are owed and how you’ll be repaid. If you are registered as self-employed, any money you are owed will be credited to your tax account.
How to Check If Your Tax Code Is Correct
If you think that you shouldn’t be on the 1185l tax code, then you can contact HMRC on 0300 200 3300 (make sure you have your national insurance number ready to get through security). Alternatively, you can use the HMRC online checker, by logging into your Personal Tax Account.
Unfortunately, your employer may not be able to help you because they can only act on the information sent to them in the HMRC coding notice.
Do I Get a Self Employed Tax Code?
If you are employed and self-employed then you may have the 1185l tax code as well as a UTR number. It means, your employer is giving you your personal allowance and that most likely all the profit you earn from your business will be taxed at your highest rate of tax.
When you fill in your tax return online, you’ll have to declare all your income in the employment and self-employment sections of your tax return. But you’ll get credit for any tax you’ve paid in your employment when HMRC calculates your tax bill.