ITIP and coding

• Your Tax Reference Number - this number is allocated to you by the Income Tax Division and is unlikely to change
  
  
• Your National Insurance Number - You will normally be sent a National Insurance Number just before your 16th birthday

Find Your Tax Reference Number

If you are uncertain of either your Tax Reference or National Insurance Number please contact the Division.

Your tax code is made up of your personal allowances and any deductions that you have claimed, such as relief for mortgage interest paid. Your code may also take account of small amounts of other income, such as interest from savings accounts. When all your personal circumstances are taken into account, the amount of income that you can earn from your employment per year before you pay any tax, is known. This is then converted into a code which will be issued both to you and your employer.

Your employer is only told the final code value and not how the code is made up.

Your coding notice shows full calculations and there are some guidance notes on the reverse.

When your employer pays you, they must take account of the most recent code that has been issued for you.

The annual amount that you can earn before paying tax will be divided into either 12 monthly or 52 weekly amounts depending on how frequently you are paid. This is called 'Free Pay'. Your pay is then calculated as follows:

Your employer must then operate the tax rates against the balance on your earnings. In the example above the first £125 would be charged at the 10% rate and the balance at the higher rate.

Your employer must also deduct any National Insurance contributions that you may be due to pay.

The tax rates and threshold in force are set for each year.

See Rates and allowances.

When you leave a job, it is important to get a form T21 from your employer. This is a Leaving Certificate which has three parts. Part 1 is sent to the IncomeTax Division to inform us that you have ceased employment, parts 2 and 3 are given to you to hand to your new employer to inform them of your current tax code. Your new employer should retain part 2, and complete and return part 3 to the Income Tax Division. This informs us that you have started a new job.

If you do not get a form T21 or lose it, you will not have details of your current ITIP code.

If you have more than one job your pay from that employment will be taxed at the prescribed 'HR' higher rate of income tax. The Income Tax Division upon your instruction will review and amend the code if necessary. That could mean amending which employer is your main employer, transferring unused allowances between your employers or partner, or depending on your circumstance, your tax code can be amended from code 'HR' to code 'SB' (Standard Band). An 'SB' tax code means all income up to the threshold band will be taxed at 10%, with any balance being taxed at the prescribed higher rate of income tax.

You must enter all your income on your tax return. Other (unearned) income and allowable deductions may be combined in your code so that the correct amount of tax has been deducted at the end of the year. If your other income is quite large and cannot be included in your code, you may be sent a payment on account notice. This will be due and payable within 30 days or by 6 January of the current tax year, whichever is the latest.

At the end of the year your employer will give you a form T14, or a final payslip, showing the amount of your total pay from them during the year. You should use this to complete your annual tax return which is sent to you in April.

When your assessment has been raised, it will show how much tax you owe (your liability), how much ITIP you have paid, and, therefore, by how much you have underpaid or overpaid your tax. If you have paid too little, the balance will be due and payable within 30 days from the date of the assessment notice or the following 6 January, whichever is latest. If you have paid too much, the Income Tax Division will refund the balance to you. Refund cheques are usually issued about 10 to 14 days after the assessment notice.

However, if the refund is due to a default assessment then it will not be authorised until we have received and processed your outstanding tax return. This is because the figures on the assessment are estimated and will not be a true reflection of your tax position.