What a tax code does
HMRC gives every employer and pension provider a tax code for each person they pay. The code tells payroll two things: how much of your pay is tax-free, and whether to work out tax across the year or on each payment separately.
It does not tell payroll your tax band. The bands are applied to whatever pay is left after the tax-free amount. That is why two people with the same code can pay very different amounts of tax.
Reading 1257L
1257L is the code most people have for 2026/27. The number is the tax-free allowance divided by ten, and L means you get the standard Personal Allowance.
- Number1257 × 10£12,570 tax-free a year
- Monthly tax-free payPayroll uses £12,579 ÷ 12£1,048.25
- Weekly tax-free pay£12,579 ÷ 52£241.90
Payroll adds £9 to the allowance (making £12,579) so that the code covers the full allowance after rounding. The difference is never more than a couple of pounds of tax a year.
What the letters mean
| Part | Meaning |
|---|---|
| L | Standard tax-free Personal Allowance |
| M | Marriage Allowance: you receive 10% of your partner’s allowance |
| N | Marriage Allowance: you transfer 10% to your partner |
| T | Other calculations, often income over £100,000 |
| 0T | No tax-free allowance; normal bands apply |
| BR | All pay taxed at 20%, usually a second job or pension |
| D0 | All pay taxed at 40% (21% in Scotland) |
| D1 | All pay taxed at 45% (42% in Scotland) |
| NT | No tax taken |
| K | Deductions exceed your allowance: an amount is added to taxable pay |
| S or C at the start | Scottish or Welsh taxpayer |
| W1, M1 or X at the end | Emergency code: each payslip taxed on its own |
Why your code changes
HMRC adjusts your code to collect or give back tax through payroll, so you do not need to deal with it at the end of the year. Common reasons include:
- Marriage Allowance: receiving it gives 1383M (£13,830); giving it gives 1131N (£11,310).
- Work expenses: a £60 uniform cleaning allowance raises the allowance to £12,630, code 1263L.
- Company benefits: the taxable value of a car, fuel or medical insurance lowers your allowance.
- Untaxed income: rental profits or savings interest above your allowance can be taxed through your code.
- Tax you owe: small underpayments from earlier years, usually up to £3,000, can be collected through your code.
- Pension or Gift Aid relief: higher-rate relief can be given by raising your allowance.
Company benefits and your code
- Personal Allowance£12,570
- Less taxable value of the benefit−£1,200
- Allowance in your code£11,370
For a basic-rate taxpayer that costs £240 a year in tax, collected a little each payday. Some employers instead “payroll” benefits by adding them to your taxable pay, in which case your code stays at 1257L.
K codes
If your adjustments are bigger than your allowance, the number is added to your taxable pay instead. A code of K475 means £4,750 is added to your pay before tax is worked out. This often happens with expensive company cars or when collecting tax on large untaxed income.
The 50% limit
Under a K code, the tax taken in any pay period cannot be more than half of your pay for that period. Anything that cannot be collected is carried forward.
Over £100,000
Between £100,000 and £125,140 of adjusted net income, your Personal Allowance falls by £1 for every £2. HMRC usually reflects this in your code based on your expected income. Someone expected to earn £110,000 has £7,570 of allowance left, so their code might be 757L.
If your income changes during the year, for example through a bonus, your code may not keep up. Any underpayment is collected later through your code or Self Assessment. Pension contributions that bring you back below £100,000 can restore the allowance.
Two jobs or a pension
You only get one Personal Allowance. HMRC normally gives it all to your main job or pension, and your other income gets BR (taxed at 20%) or D0 (40%) if you are a higher-rate taxpayer overall.
If your main job pays less than £12,570, HMRC can split the allowance so the unused part goes to your second job. You can ask for this through the HMRC app or by calling. Otherwise you would pay too much tax during the year and get it back later.
Checking and changing your code
- LookFind your code
It is on your payslip, P45, P60 and in the HMRC app or personal tax account.
- UnderstandRead your coding notice
HMRC’s coding notice lists every addition and deduction behind your code.
- CorrectUpdate HMRC
Tell HMRC about changes to your income, benefits or jobs in the app or online. They send your employer a new code.
- RecoverGet overpaid tax back
Usually through your next payslip, or after the tax year ends.
Your employer cannot change your code
Payroll must use the code HMRC sends. If it looks wrong, contact HMRC, not your employer.
Codes for common situations
| Situation | Typical code |
|---|---|
| One job, no adjustments | 1257L |
| Living in Scotland | S1257L |
| Living in Wales | C1257L |
| Receiving Marriage Allowance | 1383M |
| Transferring Marriage Allowance | 1131N |
| Second job, basic-rate taxpayer | BR |
| Second job, higher-rate taxpayer | D0 |
| New job without a P45 | 1257L M1 or W1 |
| Income about £110,000 | 757L |
| Income over £125,140 | 0T |
| Large company benefits | K code |
Tax codes for pensioners
The State Pension is taxable but paid without tax deducted. HMRC collects the tax through the code on your private or workplace pension instead, by reducing your allowance by the State Pension.
- Personal Allowance£12,570
- Less State Pension for 2026/27−£12,547.60
- Allowance left for the workplace pension£22.40
A very low code like this is correct, not a mistake. It means almost all of the workplace pension is taxed at 20%, because the State Pension has used the allowance. If you keep working past State Pension age, the same applies to your job.
Tax codes and the new tax year
Your code can change on 6 April. HMRC sends a coding notice before the new tax year if your code is changing, for example to reflect a new State Pension amount or a change in benefits. If you are on the standard 1257L code, your employer simply carries it forward.
Emergency codes do not carry forward: at the start of a new tax year, codes with W1, M1 or X are normally replaced by the cumulative version. It is a good moment to check your code in the HMRC app.
Reading a coding notice
A coding notice lists the allowances and deductions behind your code. It starts with your Personal Allowance, adds anything that increases your tax-free pay, subtracts anything HMRC needs to collect tax on, and divides the result by ten.
- Personal Allowance£12,570
- Flat-rate expenses for uniform+£60
- Company car benefit−£3,000
- Underpaid tax from last year, as an allowance reduction−£500
- Total allowances£9,130
The underpayment line is not the tax owed itself: it is the amount of allowance that, taxed at your rate, collects the tax. At 20%, £500 of lost allowance collects £100 of tax over the year.
How HMRC estimates your income
Some adjustments depend on how much HMRC expects you to earn, such as the £100,000 allowance taper, higher-rate relief on pension contributions, and whether you pay tax on savings interest. HMRC bases these on your pay so far and your previous years.
If your income is going to change, for example because you have a pay rise, go part-time or receive a large bonus, update your estimated income in the HMRC app. HMRC then recalculates your code, which avoids a large underpayment or overpayment at the end of the year. Your estimate is not a commitment, and you can change it as often as you need.
Rent, savings and other untaxed income
If you have income that is not taxed at source, HMRC can collect the tax through your code instead of asking you to pay it separately. Common examples are:
- Rental profits under £2,500 a year, if you do not file a Self Assessment return.
- Savings interest above your Personal Savings Allowance, which HMRC learns about from banks.
- Taxable State benefits, such as the State Pension or Carer’s Allowance, alongside a job.
The adjustment is an estimate based on the latest information HMRC has. If your savings interest falls, for example because rates drop or you move money into an ISA, tell HMRC so the deduction can be reduced.
Splitting your allowance between two jobs
If your main job pays less than £12,570, you are not using all of your allowance there, but your second job on a BR code still taxes every pound at 20%. HMRC can split the allowance so the unused part moves to the second job.
- Allowance needed by the main job£9,000
- Unused allowance£12,570 − £9,000£3,570
- Main job code900L
- Second job codeInstead of BR357L
Without the split you would still get the £714 back after the tax year ends, but splitting the allowance means it stays in your pay each month. You can ask for this in the HMRC app or by phone.