What does my tax code mean ?

Johnsmith2016

I am discharged bankcrupt but my tax code is 5T what does this mean?

Mouse007

Your employer is allowed to pay you £50 tax free a year. That is they must deduct tax on anything over 96p (50/52) a week or £4.17 (50/12) a month and hand it over to HMRC. The T means they are not allowed to change the tax code unless notified directly by HMRC to do so.

london1973

Sorry for butting in but this caught my attention
Does this apply to all discharged bankrupts and does this replace the income tax threshold?

Mouse007

No. A discharged bankrupt is entitled to the same personal allowance as any other tax payer, currently (2016/17) £11,000 per annum.

For most people, employed under PAYE, this allowance is given by a tax code, which is just an instruction to your employer telling them how much they can pay you before deducting tax.

The tax code for a £11,000 personal allowance would be 1100L.

If HMRC think you have more than one source of income they may restrict the code to ensure they get tax on both sources. For example you could have 2 jobs, or a PAYE job and a self employment and or rental income.

The OP asked what it meant, they did not ask why. Their tax code (50T) suggests that HMRC think they have £10,950 of untaxed income from another source.

Whilst it could also be a restriction to collect underpaid tax from an earlier year I think that is unlikely. Any pre bankruptcy tax debts should have been included in the bankruptcy and HMRC can not seek to collect them via a post bankkruptcy tax code.

london1973

Thanks, very informative