1185l Tax Code Meaning

Hello, I’m Sara, a Chartered Accountant who transitioned into running an online business. I understand just how daunting and confusing it can be to take the leap into self-employment. The questions, the uncertainties, and the steep learning curve are all challenges I’ve faced myself. Whether you’re in the early stages of planning to go self-employed, just dipping your toes into making money on your own terms, or already fully committed, this blog is dedicated to helping you every step of the way. Through detailed guides, expert tips, and practical advice, I aim to be your go-to resource. From mastering financial management and navigating tax obligations to setting up the foundations of your business, I’m here to provide you with the clarity and confidence you need to thrive in your self-employment journey.

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Tax codes are valid for one tax year*, and you and your employer will usually receive a coding notice before the new tax year starts. HMRC may also issue a letter to adjust your tax code if necessary, for instance, if you’re claiming marriage allowance or if you need to pay additional taxes through your PAYE code.

*The tax year runs from April 6 to April 5 each year. The tax code for 2020/2021 is 1250L.

1185L Tax Code

The 1185L tax code is used for individuals with one job and no additional work benefits, like a company car, or those with just one pension.

Personal Allowance

For the 2018/2019 tax year, the personal allowance is £11,850. This means you can earn this amount tax-free. Earnings above this threshold are taxed at 20% up to £46,350, 40% on income above that, and 45% on income over £150,000.

In tax coding, the last digit is omitted and replaced with a letter. The “L” indicates that you’re entitled to the standard personal allowance.

Cumulative Tax Codes

The 1185L code is cumulative, meaning you receive a portion of your personal allowance with each paycheck. For example, if you’re paid monthly, you’ll get £987.59 (£11,850 ÷ 12) tax-free each month. By the end of the tax year, you’ll have received your full allowance.

If you’ve taken a break from work and have a new job, you’ll receive any unused personal allowance in your first payslip. Your new employer will use the P45 to determine the correct code.

Emergency Tax Codes

If your tax code ends with W1, M1, or X, you’re on an emergency tax code. This typically happens if:

You start a new job without providing a P45
You begin working after being self-employed
You receive company benefits, like a company car
You start receiving the State Pension

Emergency codes are temporary. They mean you’ll pay tax on all income above the personal allowance without receiving any backlog of unused allowance. At the end of the tax year, HMRC will review the tax you’ve paid and issue a P800 notice if you owe or are owed money.

How to Check If Your Tax Code Is Correct

If you believe you’re incorrectly on the 1185L tax code, contact HMRC at 0300 200 3300 (have your National Insurance number ready) or use the HMRC online checker by logging into your Personal Tax Account. Your employer can only act on the information provided by HMRC.

Self-Employed Tax Code

If you’re self-employed, you have a Unique Taxpayer Reference (UTR) number for managing your self-assessment. If you’re both employed and self-employed, you may have the 1185L tax code for your employment and a UTR for your business. Your employer will apply the personal allowance to your salary, while your business profits will be taxed at your highest rate. When completing your tax return, declare all income from both employment and self-employment, and HMRC will credit any tax paid through your employment.