UK Tax Codes Explained: Complete Guide to Understanding Your Tax Code

Your tax code determines how much Income Tax is deducted from your salary each pay period. Getting your tax code wrong can mean overpaying or underpaying thousands of pounds. This comprehensive guide explains everything about UK tax codes for 2025/26.

A tax code is used by your employer or pension provider to work out how much Income Tax to deduct from your pay through PAYE. Your tax code is made up of numbers and letters that tell your employer:

The tax code system ensures you pay the correct amount of tax spread across the year rather than in one lump sum. Understanding your code helps you spot errors before they become expensive mistakes.

Use our Tax Code Calculator to verify your tax code is correct and see how much tax you should be paying.

1257L is the most common tax code for 2025/26, applying to most employees with one job and no complication. Here's what it means:

If you have this code, you can earn £12,570 tax-free. Everything you earn above that is taxed at 20%, 40%, or 45% depending on your income level.

Learn about UK Income Tax rates and how they work with your tax code.

BR means all your income from this employment is taxed at the basic rate (20%) with no Personal Allowance.

Example: You earn £30,000 from your main job (using 1257L) and £8,000 from a second job (using BR).

Job 1: Tax = £3,486 Job 2: Tax = £1,600 (£8,000 × 20%) Total tax: £5,086

Important: BR is often correct for second jobs because your Personal Allowance is already used by your main employment. Check with our Multiple Jobs Calculator to verify.

D0 taxes all income at the higher rate (40%) with no Personal Allowance.

Example: Main job pays £60,000 (using 1257L). Second job pays £15,000 (using D0).

The D0 code ensures your second job income is taxed at 40% since you've already used your basic rate band.

D1 taxes all income at the additional rate (45%) with no Personal Allowance. Extremely rare - only used for additional rate taxpayers (£125,140+ total income) with multiple incomes.

0T is better than BR for higher earners because it applies correct bands, but you're losing your £12,570 tax-free allowance.

NT means no tax is deducted. Extremely rare.

If you see NT and you're not in one of these categories, contact HMRC immediately.

K codes indicate you owe more tax than your Personal Allowance covers. The letter K is followed by a number.

The maximum K code restricts how much can be deducted to prevent excessive deductions (50% of your cash pay).

W1 (Week 1), M1 (Month 1), or X suffixes make your tax code non-cumulative.

W1/M1/X codes should be temporary. If you still have one after 2-3 months, contact HMRC to get a cumulative code.

If you've transferred Marriage Allowance:

Transferring spouse: Code reduced (e.g., 1257L becomes 1007L) Receiving spouse: Code increased (e.g., 1257L becomes 1507L)

Marriage Allowance lets you transfer £1,260 of unused Personal Allowance to your spouse if they earn under £12,570 and you're a basic rate taxpayer.

Worth up to £252 per year in tax savings. Read our UK Tax Guide for full details.

If you live in Scotland, you'll have an S prefix before your code:

Scottish Income Tax has different rates and bands from the rest of the UK. See our Scotland Tax Rates Guide for complete information.

If you live in Wales, you'll have a C prefix:

Currently, Welsh rates are the same as England and Northern Ireland, but Wales has the power to vary them.

HMRC calculates your tax code based on your circumstances:

Step 1: Start with Personal Allowance £12,570 for most people in 2025/26

Personal Allowance: £12,570 Minus company car benefit: -£4,500 Minus underpaid tax: -£1,200 Total allowance: £6,870 Tax code: 687L

You can earn £6,870 tax-free; everything above that is taxed normally.

Your tax code could be wrong if:

Method 2: Payslip Your current tax code is on every payslip. Look in the deductions section.

Method 3: Tax Code Calculator Use our Tax Code Calculator to input your circumstances and see what your code should be. Compare to your actual code.

Method 4: P2 Coding Notice HMRC sends a P2 notice when they change your code, explaining how it was calculated.

If you overpaid tax, HMRC refunds it through:

During the tax year: Adjustment in future pay End of tax year: P800 calculation or tax return

If you're owed more than £300, you can request immediate payment rather than waiting for year-end.

You'll complete a Starter Checklist (formerly P46). Your answers determine your initial code:

Statement A: This is your only job = 1257L (correct) Statement B: This is now your only job but you had another = 1257L cumulative Statement C: You have another job = BR (20% on everything)

Always choose accurately. A wrong statement means wrong tax code and overpayment.

Without a P45, you'll go on emergency tax until HMRC updates your code.

Your Personal Allowance goes to one job (usually highest-earning). Other jobs use BR or D0:

Total income: £40,000 Total tax: £5,486

This is correct because you only get one Personal Allowance.

If your codes seem wrong, use our Multiple Jobs Calculator to check exact figures.

If you receive a pension and still work:

Option 1: Pension uses 1257L, job uses BR Option 2: Job uses 1257L, pension uses BR

Usually, HMRC allocates the Personal Allowance to your main source of income (often the job). The other uses BR.

Company car, private medical, fuel, accommodation - these are taxable benefits. HMRC adjusts your tax code to collect tax on benefits across the year.

Car benefit value: £5,200 Tax code: 1257L becomes 687L

Calculation: £12,570 - £5,200 = £7,370 (tax-free amount) Corrected tax code would be 737L (£7,370 / 10)

This means you pay an extra £87/month through PAYE instead of a lump sum at year-end.

Your student loan plan affects your tax code letter:

Most payroll software handles all plans with "SL" now, though some older systems use specific letters.

Important: Student loan repayments are separate from tax but both are deducted through PAYE. Your tax code itself doesn't change for student loans - it's noted separately on your payslip.

Calculate your student loan repayments with our Student Loan Calculator.

Emergency tax codes put you on 1257L W1/M1 (or BR if no information). These are temporary until HMRC gets your details.

At year-end (5 April), HMRC reconciles your tax:

Refunds: Usually paid automatically within 5 weeks Underpayments: Collected through next year's tax code (if under £3,000)

Important: Your tax code for the new tax year (starting 6 April) should reflect current circumstances. If things changed during the year, update HMRC before 6 April.

How do I check my tax code? You can check your tax code on your payslip, through your Personal Tax Account on gov.uk, or by using a tax code calculator. If you suspect it's wrong, contact HMRC immediately to have it corrected.

What if my tax code is wrong? Contact HMRC as soon as possible. They can correct your tax code, and if you've overpaid tax, they will issue a refund. If you've underpaid, they may adjust your code to collect the difference over the remaining tax year.

Does my tax code change when I get a pay raise? Not automatically. HMRC may adjust your tax code if they are aware of your new income level, especially if it pushes you into a higher tax bracket or affects your Personal Allowance. However, it's always best to check your code and contact HMRC if you think it needs updating.

Can I have different tax codes for different jobs? Yes. If you have multiple jobs, your Personal Allowance is usually allocated to your main job, and other jobs will have codes like BR or D0. This ensures your tax is calculated correctly across all your income sources.

What is the most common tax code? The most common tax code for employees in the UK for the 2025/26 tax year is 1257L, which signifies the standard tax-free Personal Allowance of £12,570.

How do I get my tax code changed if it's wrong? Contact HMRC directly. You can do this online through your Personal Tax Account, by phone, or by writing to them. Provide details of your correct income and circumstances, and they will issue a revised tax code to your employer.

What happens if I'm on an emergency tax code? If you're on an emergency tax code (e.g., BR, 0T, 1257L W1/M1), you're likely paying too much tax. This usually happens when you start a new job without a P45. Contact HMRC or provide your P45 to your employer to get your correct cumulative tax code applied, and you'll receive any overpaid tax back through your salary or as a refund.

Understanding your tax code ensures you pay the right amount of tax and helps you spot errors before they become expensive mistakes. If anything looks wrong, act quickly - HMRC will correct codes and refund overpayments, but only if you tell them there's a problem.