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Tax Code K Meaning

What is a K Tax Code?

The K tax code means that you have income that is not being taxed elsewhere which adds up to more than your personal allowance and your employer is taking this tax directly from your pay.

Why Would Someone be on a K Tax Code?

The most common reason for the K tax code is that an individual owes tax from previous years for example if they are employed and self-employed. Another reason is that an individual is receiving taxable state benefits outside of their employment such as a pension or the individual is in receipt of company benefits.

How is a K Tax Code Worked Out?

HMRC will work this tax code by adding the amount of untaxed income to the individuals gross salary. The amount of untaxed income will become the tax code, with the last digit removed.

Example

The tax code K700 means someone has untaxed income of £7,000 being added to their gross salary for the tax year. If the individual is being paid monthly, £583.33 (£7,000 ÷ 12) will be added to their monthly gross pay.

An employer/pension providers cannot take more than half of someones gross wages or pension when using a K tax code.

What to Do If You Don’t Think You Should Be on a K Tax Code

It’s always worth double-checking your tax code because HMRC can make changes by mistake or don’t know about changes in your personal circumstances. If you think you have been given the wrong tax code, then firstly speak to your employer and check what paperwork they have received from HMRC. You should have received a copy of the same paperwork, but it may not have arrived. So they may be able to shed some light on the situation.

Employers are unable to make changes to tax codes unless instructed by HMRC so they will only be able to give you limited help. The best thing to do is to contact HMRC by phone on 0300 200 3300. Alternatively, you can use their income tax service online by logging into (or setting up) your personal tax account to notify them that you believe you are on the wrong tax code.

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.