Most employees in the UK see a tax code printed on their payslip, P60 or P45—but few actually understand what it means. Yet this seemingly simple set of numbers and letters determines how much tax you pay, whether you’re receiving the correct personal allowance, or if HMRC believes you owe additional tax.
For many, especially those with multiple incomes, benefits in kind, or pension income, the tax code silently adjusts their take-home pay each month. Understanding it is the first step to ensuring your employer or pension provider is deducting the right amount of tax—not too much, not too little.
1. What Is a Tax Code?
A UK tax code is issued by HMRC to employers and pension providers. It tells them how much of an employee’s income is tax-free and how much should be taxed.
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The number part represents how much tax-free income you’re entitled to.
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The letter(s) indicate your tax situation, such as your residency status, type of income, or whether you’ve used up allowances.
Tax codes are applied via PAYE (Pay As You Earn), meaning tax calculations happen automatically before you receive your salary.
2. The Most Common Tax Code: 1257L
What does 1257L mean?
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1257 = £12,570 personal allowance
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L = Eligible for standard personal allowance
This is the standard tax code for most UK employees in the 2024/25 and 2025/26 tax years who have one job, no taxable benefits, and no adjustments needed.
3. How Tax Codes Are Calculated
Tax codes are influenced by several factors:
| Factor | Effect on Tax Code |
|---|---|
| Personal allowance | Increases the number in your code |
| Company car or medical benefits | Reduces allowance → lower number |
| Underpaid tax from previous year | HMRC reduces allowance to recover it |
| Second job or pension income | One income receives 1257L; others use BR, D0 or D1 |
| Marriage Allowance transfer | M or N added |
| Residency status | NT or S codes used |
4. Common Tax Codes and What They Mean
| Tax Code | Meaning |
|---|---|
| 1257L | Standard code for most taxpayers |
| BR | Basic Rate (20%) on all income – used for second jobs |
| D0 | 40% tax on all income (higher rate only) |
| D1 | 45% (additional rate) |
| 0T | No personal allowance – often used if details are missing |
| K Codes (e.g., K470) | Negative tax codes – you owe tax or benefits > allowance |
| S1257L | Same as 1257L but income taxed under Scottish rates |
| NT | No tax deducted (used for certain non-taxable incomes) |
| M or N suffix | Marriage Allowance received (M) or transferred out (N) |
| W1/M1 | Emergency tax basis; calculated weekly or monthly only |
5. What Is an Emergency Tax Code?
If HMRC or your employer doesn’t have full income details when you start a new job, you’ll be put on an emergency tax code like:
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1257L W1 (Week 1)
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1257L M1 (Month 1)
This means your personal allowance is not applied for the whole year—only for that week or month. It’s temporary and often results in overpaid tax, which can be reclaimed.
6. Tax Codes for Second Jobs or Pensions
When you have more than one source of income:
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Your main job usually gets the full allowance (1257L).
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Other jobs/pensions get:
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BR – 20% tax on all income
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D0 – 40% tax
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D1 – 45% tax
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If HMRC splits your allowance between jobs, you might see codes like 647L for one job and 610L for another.
7. K Tax Codes: When You Owe Tax
A K code means taxable benefits or debts exceed your personal allowance.
Example:
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£12,570 allowance
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£15,000 company car and health insurance benefits
You now owe tax on £2,430. Your tax code becomes K243.
Employers must ensure that no more than half of your salary is deducted in tax, even with K codes.
8. Scottish vs UK Tax Codes
Residents of Scotland have different income tax bands.
| Code | Meaning |
|---|---|
| S1257L | Scottish standard allowance |
| SBR / SD0 / SD1 / SD2 | Scottish basic, intermediate, higher, and top rates |
9. How to Check If Your Tax Code Is Correct
You should check your tax code if:
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You’ve changed a job
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You receive taxable benefits (car, medical insurance, etc.)
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You earn over £100,000
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You claim Child Benefit and earn over £50,000
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You started a pension
You can check through:
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Payslips
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P60 or P45
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HMRC online personal tax account
10. What to Do if Your Tax Code Is Wrong
If the code is incorrect:
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Contact HMRC via phone or online account
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Provide details of income, benefits, pensions
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HMRC issues a new tax code to your employer
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Overpaid tax is refunded through payroll or via self-assessment
A qualified tax adviser such as My Tax Accountant can help review your tax code and ensure you are not overpaying tax.
11. FAQs
Q1. Can my tax code change during the tax year?
Yes. HMRC can update it when your circumstances change—new job, benefits, marriage allowance or unpaid tax adjustments.
Q2. Why am I on BR tax code?
This usually means you have a second job or pension, and no personal allowance has been allocated to it.
Q3. What happens if I ignore an incorrect tax code?
You may overpay or underpay tax. Underpayments may result in future tax bills, penalties, or interest.
Q4. How often should I check my tax code?
At least once a year or whenever your employment, salary, or benefits change.
Q5. What is the difference between 1257L and 1257L W1/M1?
1257L W1/M1 is an emergency tax code. It does not apply personal allowance for the full year, just for that pay period.
Final Thought
A tax code may look like a random string of letters and numbers, but it plays a crucial role in your financial life. A single incorrect digit can mean hundreds or even thousands lost in overpaid tax. By understanding how tax codes work and ensuring yours is accurate, you protect your income and prevent future tax complications.
