Reader’s Question – Is my income tax code correct?

2 min Read Published: 09 Mar 2011

Reader's Question:

Semi retired, my OAP pension is £840 per month with a private one at £66 per month. I work as a chauffeur and am taxed at 50%, my tax code is K650, why?

My response:

A K tax code is given to someone where they effectively owe excess tax.

Usually most people are entitled to the full income tax-free personal
allowance of £6,475. This is then signified by the tax code 647L. For
more details on how tax codes work and the different ones see my
article Money tip #4 – Check your tax code.

But if you have employee benefits or any unpaid tax then your personal
allowance will be reduced below the £6,475 to take account of them
(these could relate to the previous tax year). The result is that less
of your earnings are paid income-tax free.

However, if the level of unpaid tax or taxable employee benefits is in
excess of your personal allowance you will get a K tax code. Which is
effectively a negative personal allowance.

To quote HMRC ‘’When a K code is operated, your tax deduction for each
pay period cannot be more than half of your gross pay or pension.
(Hence the 50% figure you state). Your employer or pension provider
restricts the amount of tax deducted using a K code to make sure that
you retain a certain amount of take home pay or pension. If more tax
is due it will be collected at a later date’’.

So for you, a code of K650 means that:

  • your untaxed income was approximately £6,500 greater than your taxable income
  • as a result, approximately £6,500 must be added to your total taxable income to ensure the right amount of tax is collected

The actual calculation is a bit more complicated than this but you
catch my drift. So if you don’t believe that you have unpaid tax or received significant taxable employee benefits I suggest that you talk to your employer's payroll department ASAP.

Image: Filomena Scalise /

Looking for a financial adviser near you?

Do you need financial advice? An independent financial adviser can show you how to make the most
of your money. Find your nearest qualified and regulated adviser using this VouchedFor search tool.