Tax Code
A code used by employers to calculate how much tax to deduct from your pay, usually starting with a number (e.g., 1257L).
Key Points
- ✓1257L is the standard Tax Code for 2024/25
- ✓Numbers = Personal Allowance ÷ 10
- ✓Letters indicate your tax situation (L, M, K, BR, etc.)
- ✓Set by HMRC, used by employers to calculate tax
- ✓Can be changed if your circumstances change
Detailed Explanation
A Tax Code is a code used by your employer to calculate how much Income Tax to deduct from your pay. The most common Tax Code for 2024/25 is 1257L, which means you have a Personal Allowance of £12,570.
The numbers in your Tax Code represent your Personal Allowance divided by 10. So 1257L means £12,570 ÷ 10 = 1257. Letters after the numbers indicate your circumstances (L = standard allowance, M = Marriage Allowance received).
Your Tax Code is set by HMRC based on information they hold about you. This includes your employment status, benefits in kind, state benefits, and any adjustments from previous years.
If your Tax Code is wrong, you could be paying too much or too little tax. Common problems include not having a Tax Code updated after leaving a job, or benefits being added that you don't actually receive.
Emergency Tax Codes like 1257L W1 or M1 are temporary codes used when HMRC doesn't have complete information. They calculate tax on each pay period independently without considering previous earnings.
Practical Examples
- •Tax Code 1257L: Standard code meaning £12,570 Personal Allowance - you pay no tax on the first £12,570
- •Tax Code BR: All income taxed at Basic Rate Tax (20%) - often used for second jobs where your allowance is used elsewhere
- •Tax Code K100: You have £1,000 of income that needs to be taxed (benefits, unpaid tax from previous years) added to your earnings before calculating tax
Frequently Asked Questions
Related Terms
Personal Allowance
The amount of income you can earn tax-free each year (£12,570 for 2024/25), reduced if you earn over £100,000.
Emergency Tax Code
A temporary tax code (usually 1257L W1/M1) used when HMRC doesn't have enough information about your circumstances.
K Tax Code
A tax code where your allowances are negative, meaning you have untaxed income or benefits that need to be collected through PAYE.
L Tax Code
The standard tax code suffix indicating you're entitled to the basic personal allowance (e.g., 1257L for 2024/25).
PAYE (Pay As You Earn)
The system employers use to deduct Income Tax and National Insurance from your wages before you're paid.
Income Tax
A progressive tax on your earnings, charged at 20%, 40%, or 45% depending on your income level (after personal allowance).