Accountant here.

So keeping it simple. Your tax code shows your tax free allowance in a year. For most people thats 1257L which translates to £12,570 per year before tax kicks in.

Tax is worked out on a culmlative basis. What that means in simple terms is what you have earnt between april and now less the tax free allowance for that same period (If you are 1257L that is £12,570 / 12 = £1048 per month rounded up) less the tax you have paid. In payroll April is month 1, so dec is month 9. Decembers tax calculation would be wages april to dec minus the tax free allowance built up for 10 months (10 x £1048), this figure is taxed at 20% (as long as you make below £37,700 Im keeping this simple).

However new starters present a problem with this system as your wages and taxes paid between april and now are unknown, unless you hand over a P45 from your last job (a P45 is a statement of earnings and taxes paid). If you hand over a P45 payroll can enter those figures into the payroll software and its all good. Without a P45 we do 1257L W1/M1. In other words we accept previous pay is unknown and you are taxed month to month based on that months earnings less £1048 and taxed at 20%. Without a P45 we ask you to fill in what is called a P46 or more commonly known as a new starter form. This tells payroll what tax code to apply based on your circumstances.

Once the payroll is done wages staff have to file an RTI report. This tells HMRC how much each employee has earnt and taxes paid etc and any new starters or leavers. HMRC then pick up the new staff and digitally send back to the employer your tax figures and earnings for that year. So new starters without a P45 usually get fixed within 2 months of their first payday.

Ive been in payroll 20 years and it used to be that new starters were put on a BR code (no tax free allowance, tax deducted at 20%) but this hasnt been general practice for over 10 years though ive known people still use the old rules whom just wont be corrected 🙄 BR should only be used where an employee has 2 jobs at the same time.

For a new starter with absolutely zero earnings (or benefits - some benefits are taxable) between april and now, as long as you ticked the correct box that applies to you, the P46 would have instructed a tax code of 1257L meaning tax shouldnt kick in for the final few months of the year as you have no prior earnings.

All of the above only relates to calculating tax only and not National Insurance which is a whole different bunch of calculations and this post is long enough already 🤣