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hi folks and welcome to meaningful money episode 295 brought to you with the help of my good friends seven investment management today were going to be talking about emergency tax I was recently asked about emergency tax how it works and why it even exists to understand emergency tax you have to understand something else called the personal allowance I explained the person allowance in much more detail here but put simply its an amount of money that each of us can earn free of income tax in any one tax year this personal allowance determines your tax code and is this code that your employer or pensions provider puts into their payroll system the system then determines how much tax is deducted from your pay each month your tax code is worked out like this the person allowance currently nine four four zero per year is divided by ten and then they put a letter L on the end I have no idea why and that is the basic tax code this is also the emergency tax code or the default tax code that