What is the M1 Tax Code? The M1 tax code is one of the many tax codes used by HM Revenue & Customs (HMRC) in the UK to indicate an individual’s tax-free allowance and tax-free earnings allowance in a tax year. Tax code M1 is awarded to customers who meet certain conditions and can result in higher take-home pay. In this article, we will discuss what the M1 tax code means, who is eligible for it, and when it can change.
The first number in the tax code M1 represents the tax-free personal allowance the taxpayer has remaining for the tax year. For example, if the taxpayer has only £10 left of their tax-free allowance, their tax code will be M110. This means they have used or lost £10 of their tax-free allowance and will be taxed on their earnings above that amount.
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What is the M1 Tax Code?
What is the M1 Tax Code? Well, M1 is a tax code in the UK that is used by HMRC to indicate that an individual is entitled to receive a tax-free personal allowance of £12,570 for the current tax year.
The personal allowance is the amount of income that is tax-free for all individuals, and it is currently set at £12,570. If your income for the tax year is less than £12,570, you will not be required to pay any income tax.
The M1 tax code is usually awarded to employees who are paid by their employer, and it indicates to HMRC that the employer can take into account the employee’s tax-free personal allowance when calculating the tax due.
If you have an M1 tax code, it is important to ensure that you are only taxed on your taxable income and not on your tax-free personal allowance. If you are concerned about your tax code, it is best to check with HMRC to ensure it is correct and to see if there are any other tax allowances or reliefs that you may be entitled to.
What Do the Numbers Mean in Tax Codes?
The numbers in the M1 tax code denote the personal allowance that the taxpayer has remaining. The first number, usually between 1 and 11, denotes the tax-free personal allowance the taxpayer has remaining in pounds. For example, if the first number is “9”, the taxpayer has £9,000 of the tax-free allowance remaining.
The second number, usually a letter between A and M, indicates the amount of tax-free earnings allowance the taxpayer has remaining. The first letter in the second number represents the taxpayer’s tax-free earnings allowance remaining in thousands.
When someone receives an M1 tax code, they can expect their tax liabilities to be based on their taxable income, excluding tax-free amounts such as their tax-free personal allowance and any tax-free earnings allowance. If the taxpayer has additional allowances or reliefs that they are entitled to, these may also need to be taken into account when determining their tax liabilities.
What Do the Letters Mean in Tax Codes?
The letters in the M1 tax code indicate the amount of personal and tax-free earnings allowance that an individual has remaining for the current tax year. The letters used in the tax code are:
- T – Indicates that the individual has exhausted their tax-free personal allowance for the tax year.
- A – Indicates that the individual has exhausted their tax-free earnings allowance for the tax year.
- 0 – Indicates that the individual has neither exhausted their tax-free personal allowance nor their tax-free earnings allowance for the tax year.
- 1 – Indicates that the individual has exhausted their tax-free earnings allowance but not their tax-free personal allowance for the tax year.
- B – Indicates that the individual has exhausted their tax-free earnings allowance, but they have tax-free earnings allowance remaining from a previous tax year.
- K – Indicates that the individual has unused tax-free earnings allowance, but they have an income tax or employee tax due this tax year.
- M – Indicates that the individual has tax-free earnings allowance and unused tax-free allowance, but they have income tax or employee tax due this tax year.
Do Tax Codes Change During the Tax Year?
The changes in tax code during a tax year can indicate different things and may be due to various reasons. Some common changes that can occur during a tax year are:
- The taxpayer has left a job and has received a pay-off or a redundancy package.
- The taxpayer has started a new job and has received a lump sum payment as part of their salary package.
- The taxpayer has received a pay rise or a bonus during the tax year.
- The taxpayer has received dividends from their investments.
- The taxpayer has received taxable benefits such as car allowance or travel expenses.
- The taxpayer has received tax relief on any tax-deductible expenses such as medical expenses, charitable donations, or pension contributions.
Tax Codes Updating for the New Tax Year
At the start of each new tax year, HMRC will update the tax codes for all taxpayers expected to pay income tax. The tax code is used to determine how much tax an individual should pay on their income by adjusting their tax-free allowances to take account of any changes to their circumstances, such as earnings, tax reliefs, or the personal allowance amount.
The main reason for updating tax codes is to ensure that individuals are paying the correct amount of tax based on their income and personal circumstances. This is particularly important for those who have changes in their circumstances, such as a change in employment or taxable benefits. It is also essential for those entitled to tax relief, as this can help reduce their tax bill.
The Bottom Line
In conclusion to what is the M1 Tax Code, understanding what the M1 tax code means is essential for taxpayers in the UK. The M1 tax code indicates that an individual has a tax-free personal allowance and a tax-free earnings allowance to use during the current tax year. The tax-free personal allowance is the amount of income an individual can earn before paying income tax, while the tax-free earnings allowance is the amount of tax-free earnings that can be earned before any tax is due. The letters and numbers in the M1 tax code can also indicate any changes in the individual’s circumstances during the tax year. Taxpayers need to keep track of any changes to their tax code and ensure that they are paying the correct amount of tax.
Disclaimer: All the information provided in this article on what is the M1 tax code, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
