Ok, so where to start.
The first part of your tax code is made up of numbers, and these refer to how much income you can have before tax will be deducted. For most people who are born after 5th April 1938, their tax code will be 1100L (tax year 2016/2017). The 1100 segment of the tax code means that you have a tax free personal allowance of £11,000. The same rule applies for any tax code, your HMRC calculated tax free allowance is divided by ten, e.g. a tax code of 287L would give an employee a personal tax free allowance of £2,870.
Step one done . Step two - the letters.
The most common tax code alphabetical suffix is L. An L tax code means you're entitled to the tax free personal allowance that HMRC work out for you. However, L is not the only tax code suffix used.
*pen and paper ready...
M: an M tax code suffix relates to marriage allowance, and shows that you have received a transfer of 10% of your partners personal allowance
N: this is when you have transferred 10% of your personal allowance to your partner
S: this is applied if your income or your pension is taxed at the Scottish rate of Income Tax
Y: if you were born before 6th April 1938 and you are entitled to your full tax-free Personal Allowance
T: this would be used when your tax code includes other calculations to work out the Personal Allowance. A reason may be down to your income being over the amount for basic tax rate
0T: unfortunately this means you personal allowance has been used up! Or, another reason may be down to an employee being new, and they have not given you a P45
BR: this stands for basic rate, so all income from this job is taxed at 20%. This generally occurs if you have more than one job or are receiving pension
D0: all of your income for this job is taxed at the higher rate of 40%, again, down to having another job or receiving pension
D1: (THE DREADED D1!) all of your income on a D1 rate is taxed at 45%, the additional rate of tax. This is another tax code that can be down to extra jobs and pension
NT: this tax code means that you're not paying any tax on this income
K: if you have a K in your tax code, deductions are usually due for company benefits, pension or tax owed from a previous year, and this amounts to greater than your personal allowance. All you would need to do is multiply your tax code by 10, to get the amount that would need to be added to taxable income before any deductions can be calculated
That's the majority covered... now for the 'odd extras'...
W1 & M1: standing for week one and month one, these suffixes are placed with a tax code to show the tax is calculated only on the current tax period (paid either weekly or monthly) rather than the entire year, making it non-cumulative
Like most things in life, unfortunately just when you get to grips with things, change kicks in, and as you can probably expect, tax codes are certainly no different. If your tax code does change, then HMRC will send a notification (a P6) to the employee and the employer. Some bureaus such as Dataplan can also act on an employers behalf to cut out the middle man and get tax code notifications directly.
So now you have promoted yourself to a higher state of being, you are the master of the letters, commander of the numbers, the P6 warrior, and will question your tax code no more - take forth your new found wisdom and enlighten the masses!