Your tax code tells your employer or pension provider how much Income Tax to deduct from your pay. The most common code is 1257L, but there are many variations. An incorrect tax code can mean you overpay or underpay tax for months without realising.
How to Read a Tax Code
A standard tax code has a number followed by a letter. The number represents your tax-free allowance — multiply it by 10 to get the amount. For example:
- 1257L → £12,570 tax-free (the standard Personal Allowance)
- 1300L → £13,000 tax-free (e.g., includes Marriage Allowance or employment expenses)
- 1000L → £10,000 tax-free (reduced, possibly due to a benefit in kind)
Common Letter Codes
| Letter | Meaning |
|---|---|
| L | Standard Personal Allowance applies |
| M | You have received Marriage Allowance from your partner |
| N | You have transferred Marriage Allowance to your partner |
| T | HMRC needs to review your code (other calculations included) |
| K | Your deductions exceed your allowances — the “K code” adds tax |
| BR | All income taxed at Basic Rate (20%), no Personal Allowance |
| D0 | All income taxed at Higher Rate (40%) |
| D1 | All income taxed at Additional Rate (45%) |
| 0T | No Personal Allowance — used when HMRC has no information |
| NT | No tax deducted at all |
Scottish taxpayers see an S prefix (e.g., S1257L), and Welsh taxpayers see a C prefix (e.g., C1257L).
When You Might Have a Non-Standard Code
Your code may differ from 1257L if:
- You receive company benefits (car, medical insurance) — your allowance is reduced to collect the tax
- You have untaxed income from a previous year that HMRC is collecting through your code
- You have multiple jobs — your second job typically gets a BR or 0T code
- You earn over £100,000 — the Personal Allowance taper reduces your allowance
- You have received Marriage Allowance (M code) or transferred it (N code)
The K Code
A K code means your tax-free allowance has been used up and you owe additional tax. Instead of giving you an allowance, HMRC adds a notional amount to your taxable pay. For example, K500 means £5,000 is added to your income before tax is calculated. K codes are common when substantial benefits in kind or prior underpayments are collected through PAYE.
What to Do If Your Tax Code Is Wrong
- Check your tax code notice: HMRC sends you a P2 coding notice at the start of each tax year and whenever your code changes. Review it carefully.
- Use the HMRC online tool: Log in to your Personal Tax Account at GOV.UK to view and check your tax code.
- Contact HMRC: If the code is wrong, call HMRC or update your details online. Common reasons include an old company benefit still being deducted, or Marriage Allowance not being applied.
- Check your payslip: Your payslip shows your current tax code. Compare it with your P2 notice.
Emergency Tax Codes
When you start a new job without a P45, your employer may use an emergency tax code (typically 1257L on a Week 1/Month 1 basis). This means each pay period is taxed in isolation without accounting for cumulative earnings. It usually corrects itself once HMRC sends your proper code, and any overpayment is refunded automatically.