If you have a letter K on your payslip, you could be paying more tax to HMRC. The tax authority uses this code to collect unpaid taxes by reducing your tax-free personal allowance.
Understanding Tax Codes
Your tax code, typically found at the top of your payslip, determines how much tax you pay and your tax-free personal allowance. The standard code is 1257L, which provides a £12,570 tax-free allowance. The L indicates entitlement to the standard allowance. Other codes include BR (emergency tax for new jobs) and N (allowance transferred to spouse).
The K Code Explained
The K code means HMRC has reduced your personal allowance to recover owed taxes. Tax experts at the Low Incomes Tax Reform Group (LITRG) explain that K codes result in more tax collected via PAYE. If your code recently changed to a K code, HMRC may be collecting debts like late filing penalties.
You can identify a K code on your payslip: the letter K appears before the number, such as K784, unlike standard codes where the letter follows the number, like 1257L.
What to Do
If you don't know why you have a K code, contact HMRC immediately. HMRC states that K codes apply when you have income not taxed elsewhere that exceeds your tax-free allowance, such as paying previous year's tax through wages or receiving taxable benefits.
