I wanted to learn a bit about income tax and tax code and came across this explanation below. I don't understand why if you earn 27.000 pounds per year your taxable income is 17,000 pounds. Can you help me to find the answer?
2. What the numbers mean
The numbers in an employees tax code show how much tax-free income they get in that tax year.
You usually multiply the number in the tax code by 10 to get the total amount of income they can earn before being taxed.
For example, an employee with the tax code 1000L can earn £10,000 before being taxed. If they earn £27,000 per year, their taxable income is £17,000.
Each employee gets a tax free allowance, so the taxable income is that left after deducting the tax free allowance. In the example quoted, the income is 27,000, less the tax free allowance of £10,000 to leave £17000 which is the taxable income. Likewise £27000, less 5000 tax free allowance, which would leave £22000 taxable allowance.
(Reason for belated edit, I just spotted i typed 2700 instead of 27000
-- Edited by Leger on Sunday 5th of April 2015 11:49:06 AM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
