Every payslip has a tax code on it — but most people have no idea what it means or whether it’s correct. A wrong tax code can mean you’re overpaying or underpaying tax without realising it. This guide explains what tax codes are, what the most common ones mean, and how to sort things out if yours is wrong.
What Is a Tax Code?
A tax code is a series of letters and numbers issued by HMRC that tells your employer how much Income Tax to deduct from your pay. It represents your tax-free Personal Allowance for the tax year and any adjustments HMRC has made based on your circumstances.
Your employer uses the code to work out how much of your salary is tax-free and how much is taxable. Get the code wrong, and you could be paying too much or too little tax — sometimes for months or years without knowing.
How Tax Codes Work
A standard tax code is made up of a number followed by a letter. The number represents your annual tax-free Personal Allowance divided by 10.
For example, 1257L means:
- 1257 = Your Personal Allowance is £12,570 (1257 x 10)
- L = You’re entitled to the standard Personal Allowance
If your code is 1257L, the first £12,570 of your annual income is tax-free, and everything above that is taxed at the appropriate rate.
Common Tax Codes
| Code | Meaning |
|---|---|
| 1257L | Standard Personal Allowance of £12,570. Most employees in the UK will have this code. |
| BR | All income is taxed at the Basic Rate (20%). Used when you’ve used up your Personal Allowance elsewhere or for a second job. |
| D0 | All income is taxed at the Higher Rate (40%). Often used for a second job or pension income. |
| D1 | All income is taxed at the Additional Rate (45%). For high earners with multiple income sources. |
| NT | No tax is to be deducted. Used when all your Personal Allowance is being used against another source of income. |
| K code (e.g. K475) | You have benefits in kind or other income that exceed your Personal Allowance. The number shows how much extra taxable income you have. Your employer adds this to your salary before calculating tax. |
| 0T | Your Personal Allowance has been used up or you don’t have one. All income is taxed from the first pound. |
| W1 / M1 | Emergency tax codes. See below. |
| S1257L | Scottish version of 1257L. Uses Scottish Income Tax rates instead of UK rates. |
| SBR | Scottish Basic Rate. All income taxed at Scottish rates. |
| SD0 | Scottish Higher Rate. All income taxed at Scottish higher rates. |
| SD1 | Scottish Advanced Rate. All income taxed at Scottish advanced rates. |
Emergency Tax Codes
Emergency tax codes are used temporarily when HMRC doesn’t have enough information to issue a full code. They’re common when you start a new job.
W1 and M1
- W1 — “Week 1” basis. Tax is calculated on a week-by-week basis without looking at what you’ve earned earlier in the year. Used for weekly-paid employees.
- M1 — “Month 1” basis. The same principle but calculated monthly. Used for monthly-paid employees.
These codes mean your Personal Allowance is applied fresh each pay period, rather than being spread across the whole year. This typically results in more tax being deducted initially, but you should receive a refund or have the code corrected once HMRC processes your information.
Cumulative vs Non-Cumulative
The standard tax system is cumulative — your tax-free allowance is spread across the year, and previous payments are taken into account. If you earn nothing one month, you build up unused allowance for the next month.
Emergency codes are non-cumulative. Each pay period is treated independently. This means you don’t benefit from building up unused allowance, which is why you often pay more tax under an emergency code.
Once HMRC has all the information it needs, they’ll issue a correct code and your tax will be adjusted — usually in the next payslip.
Tax Codes for Specific Situations
Multiple Jobs
If you have more than one job, you’ll usually have different tax codes for each:
- Main job — Gets the standard Personal Allowance code (e.g. 1257L).
- Second job — Typically gets BR, D0, or D1, meaning all income from that job is taxed at the relevant rate with no Personal Allowance.
This is because you only get one Personal Allowance across all your jobs. HMRC assigns it to your highest-paying job and taxes the rest at a flat rate.
Benefits in Kind
If your employer provides non-cash benefits — like a company car, private medical insurance, or a phone — these are taxable. HMRC estimates their value and reduces your tax-free allowance accordingly.
For example, if your company car is estimated to be worth £3,000 in benefit, your Personal Allowance might be reduced from £12,570 to £9,570, giving you a tax code of 957L.
If benefits exceed your Personal Allowance, you’ll get a K code.
Pension Income
State Pension is usually paid without tax deducted, but private pension income is taxed. If the State Pension is your only income, you may not owe any tax at all. If you have a private pension, HMRC will issue a tax code that reflects your total income.
Scottish taxpayers
If you live in Scotland, you pay Scottish Income Tax rates rather than UK rates. Your tax code will start with S (e.g. S1257L). The rates differ:
| Band | Scottish Rate | UK Rate |
|---|---|---|
| Basic Rate | 20% | 20% |
| Higher Rate | 42% | 40% |
| Advanced Rate | 45% | 45% |
| Top Rate | 48% | 45% |
How to Check Your Tax Code
On Your Payslip
Your tax code should appear on every payslip your employer provides. It’s usually near the top, alongside your employee number and pay period.
On Your P60
Your P60 is the end-of-year tax summary your employer gives you after the end of the tax year (by 31 May). It shows your total earnings, total tax paid, and the tax code(s) used during the year.
Through HMRC
You can check your tax code and Personal Allowance through your gov.uk Personal Tax Account. This shows:
- Your current tax code
- Your estimated Personal Allowance
- Your income from all sources
- Any adjustments or underpayments
What to Do If Your Tax Code Is Wrong
If you think your tax code is wrong, act quickly — you could be overpaying tax without realising it.
Step 1: Check your details
Log into your gov.uk Personal Tax Account and check:
- Your employer details are correct
- Your income sources match what HMRC has on record
- Any benefits in kind are accurately reflected
Step 2: Contact HMRC
If something doesn’t match, call HMRC on 0300 200 3300 (or use their online contact form). Have your payslips, P60, and National Insurance number ready. HMRC can amend your tax code and backdate corrections.
Step 3: Use the HMRC tax code calculator
HMRC provides an online tax code calculator that helps you work out what your code should be based on your income and circumstances. This is useful if you want to double-check before contacting them.
Step 4: Claim a refund if owed
If you’ve been overpaying tax, HMRC will usually issue a refund automatically through your tax code in a future payslip. If you’ve left a job, you can claim a refund directly from HMRC.
Common Mistakes and Red Flags
- Code hasn’t changed after a pay rise — If your income increases significantly, your code should update. If it doesn’t, you may end up underpaying tax.
- Emergency code still in use months later — If you started a new job months ago and still have W1 or M1, contact HMRC.
- Multiple jobs with the same code — Each job should have its own code. Getting 1257L for two jobs means you’re using your Personal Allowance twice, which will result in a tax bill.
- Benefits in kind not reflected — If your employer provides benefits but your code hasn’t been adjusted, HMRC may issue a large tax bill later.
Key Takeaways
- Your tax code tells your employer how much tax to deduct from your pay.
- 1257L is the standard code for most UK employees (£12,570 Personal Allowance).
- BR, D0, NT are flat-rate codes used for second jobs, pension income, or when your allowance is used up.
- W1/M1 emergency codes are temporary and non-cumulative — check if they’re still on your payslip after the first month or two.
- Always check your payslip and P60 for the correct code, and contact HMRC if something looks wrong.
- Scottish taxpayers have different codes starting with S and pay different rates.