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income tax code

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A code number issued by HM Revenue and Customs that takes account of the personal allowance available to the taxpayer together with any other additional allowances to which he or she is entitled. The code is used by the employer through the PAYE scheme to calculate the taxable pay using tables supplied by the Revenue (now usually in the form of computer software). The income tax code can also be used to tax benefits in kind, such as company cars, by reducing the code number and so collecting more tax each tax week or month. The code provides a means of ensuring that the tax due for the fiscal year is deducted from the employee’s earnings in equal weekly or monthly amounts.

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