Calling the housekeeper

Bill Dodwell asks whether tax codes complexities are due for a good spring clean

One of the cleverest – but most misunderstood (and often incorrect) – parts of the tax system is the tax code. Everyone who is paid through PAYE has a tax code for each source of employment or pension income. Their invention goes back to the dawn of PAYE, in 1944, when employers used paper tables to work out how much tax to deduct from 12 million employees’ income.  

The idea of the tax code was to define how much of the individual’s pay was tax free. It also took on other attributes, such as setting a specific tax rate to be applied to the source of income. In some cases, it can be used to require additional tax deductions from a source – the infamous K tax code.  

Tax codes complexities