This week's expert is Chas Roy-Chowdury
BBC News' Ask the Expert column gives readers a chance to get their financial questions answered by experts.
This week, Chas Roy-Chowdury head of taxation at the Association of Chartered Certified Accountants (ACCA) will help reader David Collins check his tax code.
Mr Collins would like to find out if he is paying the correct level of tax.
Chas Roy-Chowdury head of taxation at the ACCA
If you submit a self-assessment tax return, or have benefits in kind, you should shortly be receiving a notice of coding.
The notice is a series of numbers and letters which spell out the amount you can earn before paying tax.
This amount is known as your taxable allowance and can differ depending on your age and marital status.
The most common letters for your tax code will be the following:
- L - You are entitled to the basic personal allowance of £5035
- P - You are entitled to the full personal allowance for someone aged 65 to 74 (£7280)
- Y - If you are entitled to the full personal allowance for someone over 75 (£7420).
- T - If you do not wish anyone to know about your circumstances or if some items of the code require verification by Revenue & Customs
The numbers which accompany the letters in your code represent the actual amount of allowance you have, in other words tax free income, before you have to pay tax.
The last number from the allowance is, however, omitted. For example, if you are entitled to the full personal allowance your code will be 503L or 503T.
Items which could increase your tax free allowance are things such as subscriptions to a recognised professional or trade body or travel expenses other than those for home to work travel, which have not been reimbursed to you by your employer.
Items which could reduce your tax free allowance are any untaxed interest, benefits in kind or any freelance earnings.
All figures quoted apply to the 2006/2007 tax year.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.