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a tax code is a combination of numbers and letters most people with only one job or pension will have this standard tax code we tell your employer or pension provider which code to use this allows them to work out the amount of income tax to take from your wage or pension the numbers show how much of your income is tax-free in the year to work out the numbers we start with your tax-free personal allowance we add to this any amount that reduces your tax bill this is known as tax relief for example expenses you claim for cleaning your uniform next we take off any amount thats taxable this could be a benefit from your job such as a company car benefit or a taxable State benefit this leaves your tax-free amount for the year we remove the last number and add a letter the letter relates to your circumstances and how they affect your personal allowance for example a letter L shows youre entitled to the standard tax-free personal allowance other examples are M and N which refer to marriage a
