[Sir Trev]

Folks - as a bean counter I can simplify this a bit.

Take a piece of paper (or spreadsheet) and on the left hand side list your income. This will be your annual pay (look on your pay slip, may be called "base" or "reference" pay) plus any additional income or "benefits in kind". BIK is not smutty by the way - it includes company cars, health insurance, or anything else you get as a perk you would otherwise have had to pay for. Add to this side any underpayments the Revenue may have notified you of from previous years*. Add also any additional bonus or commission payments you may get over the year as these all count.

On the right hand side list your allowances and deductions. Everyone gets a personal allowance as already mentioned by a few posters, but you may get others. Include on this side any OVERpayments you have made in previous years*.

The total of the left hand side, minus the total of the right hand side, equals your TAXABLE PAY - the amount you actually pay tax on. It is this that forms the basis of your tax code.

All this should be on your coding notification. CHECK IT CAREFULLY. If anything is wrong or missing get in touch with your tax office straight away. By the way, if HMRC use estimates for any reason it can take years for the under/over recovery to stop. When our company cars were taken back and we got allowances instead it took three years for the "adjustments" to stop on my code.



*both under and over payments have to be agreed by HMRC in advance for them to be used them in your code computation.