Every payslip shows a tax code, yet most people have no idea what it means. Your tax code determines how much Income Tax your employer deducts from your salary each pay period. If it’s wrong, you could be overpaying or underpaying tax for months without knowing. This guide breaks down every tax code you’re likely to encounter and explains what to do if yours isn’t correct.
What Is a Tax Code?
A tax code is a combination of numbers and letters issued by HMRC to your employer. It tells your employer how much of your earnings is tax-free and how much should be taxed. The code is based on your annual Personal Allowance — the amount of income you can earn before paying any tax — plus any adjustments HMRC has made for benefits in kind, underpayments from previous years, or other income sources.
Your employer uses this code every pay period to calculate the right amount of tax to deduct. If the code is wrong, the tax deduction will be wrong too.
How Tax Codes Work
A standard tax code has a number followed by a letter. The number represents your annual Personal Allowance divided by ten.
1257L works like this:
- 1257 — Your Personal Allowance is £12,570 (1257 x 10)
- L — You are entitled to the standard Personal Allowance
With this code, the first £12,570 of your annual income is tax-free. Everything above that is taxed at whatever rate applies to your income level.
Common UK Tax Codes
| Code | What It Means |
|---|---|
| 1257L | Standard Personal Allowance of £12,570. The most common code for UK employees. |
| BR | All income taxed at the Basic Rate (20%). Used when your Personal Allowance is used up elsewhere or for a second job. |
| D0 | All income taxed at the Higher Rate (40%). Often used for second jobs or pension income when your main job already uses your allowance. |
| D1 | All income taxed at the Additional Rate (45%). For high earners with multiple income sources. |
| NT | No tax deducted. Used when your entire Personal Allowance is being applied against another income source. |
| 0T | No Personal Allowance available. All income is taxed from the first pound. Used when HMRC cannot allocate an allowance. |
| K code (e.g. K475) | Benefits in kind or other income exceed your Personal Allowance. The number indicates extra taxable income added to your salary before tax is calculated. |
Emergency Tax Codes
Emergency codes are used temporarily when HMRC does not have enough information to issue a permanent code. They are very common when you start a new job.
W1 and M1
- W1 — “Week 1” basis. Tax is calculated week by week without considering earlier earnings in the year. For weekly-paid employees.
- M1 — “Month 1” basis. The same principle but calculated monthly. For monthly-paid employees.
Cumulative vs Non-Cumulative
Under the normal cumulative system, your tax-free allowance is spread across the year and previous payments are taken into account. If you earn nothing one month, unused allowance carries forward.
Emergency codes are non-cumulative. Each pay period is treated independently, so you do not build up unused allowance. This usually means more tax is deducted initially.
Once HMRC has the information it needs, it will issue a correct code and your tax will be adjusted — typically in the next payslip. If you see 1257W1 or 1257M1 on your payslip, this is a standard allowance applied on a week-1 or month-1 basis.
Tax Codes for Multiple Jobs
If you have more than one job, you get only one Personal Allowance across all of them. HMRC assigns it to your highest-paying job. Your other jobs will typically receive:
- BR — All income from that job taxed at 20%
- D0 — All income taxed at 40%
- D1 — All income taxed at 45%
If you believe the combined income from your secondary jobs is below the Personal Allowance threshold, you can contact HMRC and request a different code so you are not overtaxed.
Marriage Allowance and Tax Codes
The Marriage Allowance allows you to transfer £1,260 of your Personal Allowance to your spouse or civil partner if one of you earns below the Personal Allowance and the other is a basic-rate taxpayer.
When this transfer happens, the receiving partner’s tax code changes. For example, the partner receiving the extra allowance might see their code change from 1257L to 1380L (reflecting the additional £1,260). The transferring partner’s code will decrease accordingly.
Student Loan Deductions and Tax Codes
If you are repaying a student loan, your tax code may show a letter indicating the deduction plan:
- S — Plan 2 (post-2012 loan)
- S Plan 1 — Plan 1 (pre-2012 loan)
- S Plan 4 — Plan 4 (Scottish student loan)
A tax code like 1257L S1 means you have the standard Personal Allowance and are also repaying a Plan 1 student loan. The student loan deduction is calculated separately by your employer based on your earnings, not the tax code itself, but the letter tells your employer which repayment plan applies.
Pension Deductions and Tax Codes
Workplace pension contributions and private pension income can also affect your tax code:
- If you receive a private pension, HMRC issues a tax code to collect tax on that income.
- A code like 1257L P indicates your Personal Allowance is being applied against pension income.
- State Pension is usually paid without tax deducted, but if it pushes you into a tax bracket, HMRC may adjust your works tax code through a BR or D0 code.
How to Check Your Tax Code
On Your Payslip
Your tax code appears on every payslip, usually near the top alongside your employee number and pay period.
On Your P60
Your P60 is the end-of-year tax summary issued by 31 May after the tax year ends. It shows total earnings, total tax paid, and the tax code(s) used during the year.
Through HMRC
Log into your HMRC Personal Tax Account to see:
- Your current tax code
- Your estimated Personal Allowance
- Income from all sources
- Any adjustments or underpayments
What to Do If Your Tax Code Is Wrong
A wrong tax code means the wrong amount of tax is being deducted. Here is what to do:
- Check your details — Log into your HMRC Personal Tax Account and confirm your employer, income sources, and benefits in kind are correct.
- Contact HMRC — Call 0300 200 3300 or use the online contact form. Have your payslips, P60, and National Insurance number ready. HMRC can amend your code and backdate corrections.
- Claim a refund — If you have overpaid tax, HMRC usually issues a refund automatically through your tax code in a future payslip. If you have left a job, you can claim directly from HMRC.
Worked Example: Tax Code 1257L on a £35,000 Salary
| Item | Amount |
|---|---|
| Annual salary | £35,000 |
| Tax code | 1257L |
| Personal Allowance | £12,570 |
| Taxable income | £22,430 |
| Tax at 20% | £4,486 |
| Net annual pay | £30,514 |
| Net monthly pay | £2,543 |
Your employer deducts £12,570 from your salary before applying the 20% rate to the remaining £22,430.
Key Tips
- Always check your tax code on your very first payslip in a new job — emergency codes are common and should not stay in place for long.
- If you think your code is wrong, contact HMRC immediately. The longer you leave it, the more tax you could be overpaying (or underpaying).
- Use the HMRC Personal Tax Account to view and manage your tax code online.
- Understand what emergency codes mean — W1 and M1 are temporary and should resolve once HMRC processes your information.
- Report life changes to HMRC promptly — a new job, a second job, benefits in kind, or marriage can all affect your code.