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Tax codes are fundamental to the operation of the PAYE regime. They are so named because they help the employer to deduct the correct amount of PAYE tax, without the employer needing to know any specific confidential employee information.

Most tax codes comprise numbers and a letter. The numbers in the code represent the amount of the total allowances and reliefs available to the individual less amounts that restrict those allowances and reliefs (called 'restrictions'). Consequently, an employee whose allowances for 2022/23 are £12,570 and who has a restriction of £5,863 will have net allowances of £6,707. The number element of the code (omitting the last digit) is therefore 670. Similarly, a code with the digits 671 represents slightly higher net allowances of £6,710 to £6.719 inclusive.

In addition to a number, the code generally includes a letter. In suffix codes, the suffix enables the employer to make an automatic adjustment if the personal allowances are increased by a Budget Resolution¹. The suffixes currently in use are²:

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