Tax codes explained

What the number means

Multiply the number by ten and you have the tax-free pay the code grants you for the year. The standard code for 2026-27 is 1257L, because the Personal Allowance is £12,570 and 1257L hands you exactly that.

What payroll does with it next is the part worth understanding. The allowance is not held back and set against your earnings at the end of the year. It is spread evenly across your pay periods: on a monthly payroll you get £1,047.50 tax free every month, whether you earned a great deal that month or nothing at all. Your code is a forecast, made before the year began, applied twelve times.

The letter on the end

The letter is a category, not a rate: it tells payroll why the number is what it is. L is the ordinary case, the standard allowance and nothing else. M and N are a pair, and always appear on two people's payslips at once: Marriage Allowance moves a tenth of one partner's allowance to the other, so the person receiving it is coded M and the person giving it up is coded N.

T means the code contains something HMRC wants to look at again rather than roll forward. The most common reason is an allowance that moves with income: above £100,000 the Personal Allowance is withdrawn until it disappears at £125,140, so the tax-free figure in your code depends on an estimate of what you will earn. Get that estimate wrong in either direction and the code is wrong all year. That band is also where the highest marginal rate in the system sits, which makes it an expensive place to be mis-coded.

Codes with no number at all

BR, D0 and D1 give you no tax-free pay and charge one flat rate on every pound. That sounds punitive and usually is not. Your allowance can only be given once, so if you have two jobs, or a job and a pension, HMRC gives the whole allowance to the main one and codes the other at a flat rate. BR taxes the second income at the basic rate; if your combined income is already in the higher band, D0 is used instead, and D1 above that.

Scotland has more bands than the rest of the UK, so it needs more of these codes: SD0 to SD3 map onto the Scottish rates above the basic rate. The mapping is not intuitive — SD1 is the Scottish higher rate, not the additional rate — and reading it as though it were a rest-of-UK code misstates the tax by thousands.

0T looks like a flat-rate code and behaves differently. It grants no allowance, but it still walks the normal bands, so income under it is taxed progressively rather than flattened to a single rate. It turns up when a new employer has no starter information from you, and legitimately when income has passed £125,140 and there is no allowance left to give. NT is the opposite extreme: no income tax deducted at all. It is rare and specific, and if it appears without an obvious reason, query it — tax not collected now is tax owed later.

S and C: the code picks the country

A code beginning S puts you on Scottish rates; C, for Cymru, puts you on Welsh rates. The prefix beats the address HMRC holds for you, because payroll follows the code and nothing else. If you have moved across a border and your code has not caught up, you are being taxed on the wrong table until it does. The take-home pay calculator behaves the same way on purpose: enter an S code and it overrides the country you picked, because that is what your payslip will do.

K codes run backwards

A K code is the one that surprises people. It appears when you have untaxed income — a company car, medical insurance, a state pension, or tax owed from an earlier year — that comes to more than your allowances. There is no allowance left to reduce, so the number is added to your taxable pay instead of taken off it. Benefits of £20,000 set against a £12,570 allowance produce K743: the gap between the two, with the last digit dropped, treated as extra income you never see in cash.

The sting is that the addition is taxed at whatever band it lands in. The same K code costs a higher-rate payer roughly twice what it costs a basic-rate payer, which is why two colleagues with the same company car can lose very different amounts to it.

W1, M1 and X: the emergency markers

Normally PAYE is cumulative. Every payday, payroll looks at everything you have earned and everything you have paid since 6 April, works out what the total should be by that point in the year, and corrects the difference in that pay packet.

The W1, M1 or X marker means the code is operated on a non-cumulative basis: each pay period is taxed in isolation, ignoring what you have already earned this year. It usually corrects itself once HMRC issues a full code, and can mean a refund.

In practice that usually means too much tax rather than too little, because each period is treated as though it were typical and no account is taken of the months you were not paid at all. Someone who starts a job in September on an emergency code has had six months of unused allowance ignored.

Is my code wrong?

A code is only ever an estimate of your circumstances, and it goes stale in four common ways.

1. You changed jobs part-way through the year. Until your new employer has your P45 details or a code from HMRC, they have to guess, and the guess is an emergency code. This is the single most common reason a payslip looks wrong.
2. A benefit started. A company car, private medical cover or an interest-free loan is taxable but never paid to you in cash, so HMRC collects the tax by cutting your code. The cut is based on an estimate of the benefit's value, and estimates arrive late and leave late.
3. You have two jobs, or a job and a pension. The allowance should be given once. Two employers both operating 1257L means it is being given twice, and an underpayment is quietly building all year. Two employers both operating BR means it is not being given at all.
4. Last year's estimate was carried over. An expenses claim you no longer make, a bonus you did not repeat, or an underpayment from a previous year being collected through this year's code. All of these persist until someone tells HMRC otherwise.

Your employer cannot change your code, and there is no point asking them to — they are legally required to operate the code they are sent. Only HMRC can issue a new one. The fastest route is your personal tax account on gov.uk, where the coding notice sets out every figure that went into the code. Check the estimated pay and the benefit values in particular: those are the numbers most likely to be wrong, and they are the ones you can correct.

Am I owed money?

Often, yes — and often it arrives without you doing anything. Because PAYE is cumulative, the moment a correct code reaches your employer the next payslip recalculates the whole year to date and refunds the difference through your pay. Start a job on an emergency code and stay put, and the money usually comes back a month or two after the proper code arrives. An emergency code is worth watching, not panicking about.

It does not always self-correct. If the tax year ended while you were still on the wrong code, if you left the job before it was fixed, or if you had more than one source of income pulling in different directions, the correction happens after 5 April instead: HMRC reconciles the year and issues a P800 calculation setting out the refund or the shortfall. Earlier years can be reopened too, within HMRC's time limits.

The tool at the top of this page is the quick version of that check. It works out the income tax your code collects over a full year and compares it with the tax the standard rules produce on the same salary. A gap is not proof of an error — a K code or a BR code on a second job is supposed to produce one — but if you cannot explain the gap, it is the amount worth asking about. For the whole payslip, National Insurance and student loan included, the take-home pay calculator takes your tax code as an input. Every rate either page uses is listed, with the source it was read from, on the methodology page.

Tax code questions

What does my tax code mean?

The number is the tax-free allowance your employer applies, with the last digit dropped. The letter says why. A standard code gives you the ordinary Personal Allowance spread evenly across the year, and every other code is a statement that something about your position is not standard.

What is an emergency tax code?

A code operated on a month-one basis, which means each pay period is taxed as though it were the first of the year with no history behind it. It is not a penalty rate — it is a code without information, and it usually corrects itself once HMRC has your details.

Why does my tax code start with a K?

Because the deductions against your allowance are larger than the allowance itself, so instead of tax-free pay you have an amount added to your taxable income. Company cars, medical insurance and underpaid tax from an earlier year are the usual causes.

How do I get my tax code corrected?

Through your personal tax account or by contacting HMRC directly — your employer cannot change it and must operate whatever code they are sent. The sooner a wrong code is fixed the less of the year has to be unwound, and a cumulative code puts things right by itself once corrected.