Income Tax. Can you advise?

[Mr.Tamzarian]

I received a letter from the Inland Revenue advising that my tax code had changed from 543L to 647L for the current year to April 2010. I'm not sure what this means. Will I be better off in my salary? Thank you.

[Gizmonster]

I could be wrong but I'm fairly sure that if you add a "5" (or is it a "0" ??) to the end of your tax code - then that is your yearly tax free allowance.
So, in your case, the amount you can earn per year, before the tax man starts to bite, has just gone up from �5435 to �6475.

I may be wrong but I'm sure I'm on the right lines - I'm sure someone will correct me where necessary

[fadeout73]

Yes you will be better of (slightly). It means you can earn �6,470 before paying tax, whereas previously it was �5,430 before you were taxed.

[Mr.Tamzarian]

Do you know how this is worked out? I mean, can I earn �6470 before I start to pay tax, or is it worked out on a weekly basis? e.g. 6470/52 = 124. Does that mean I can earn �124 per week before I start to pay tax?

[Postdog]

no

[Skyline D]

If you are paid weekly you get 1/52nd of the allowance per week and then pay tax on the balance at 20%.

The short answer to the intitial question is "yes, you'll pay less tax".

[madmaggot]

If you are taxed cumulatively ie deductions worked out on the earnings to date you are certain to get the full allowance.
If you are taxed on WK1/MTH1 basis and the amount you earn per period varies a great deal you may not get the full allowance for the year but may need to claim any over deductions at the year end.
Most people are taxed cumulatively; on your payslip your code will either have 647L WK1/MTH1 or just 647L.
Why don't you speak to your wages department as they will know exactly how your pay works and will be able to explain your particular situation?