Originally Posted by Redkop
An easier way to describe it in laymans terms is....
Say you earn 15k per annum
Your tax code is 500L - so that means you are allowed 5k tax free
So your taxable earnings are 10k
This is spread over the tax year on an accumulation basis.
Many people think because they are allowed 5k tax free that they don't pay tax until they have earned 5k, this is wrong and is the reason why you have a Tax Code which is spread over 12 months.
HTH
Also worth pointing out- if you earn less than your allowance you shouldn't be taxed on it- but there is no real way the HMRC will know this- hence why you have a tax code- and need to claim the tax you pay back.
NI however is a must.
Jake