UK Finance

UK Tax Codes Explained: What the Numbers and Letters Mean

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Your tax code is on every payslip, but most people have no idea what it means. Getting it wrong can cost you hundreds — either overpaying or underpaying tax. Understanding your code takes 5 minutes and could save you money.

How Tax Codes Work

Your tax code tells your employer how much tax-free income you're entitled to before they start deducting tax. The most common code is 1257L, which means you have a £12,570 tax-free Personal Allowance. The number represents your allowance with the last digit removed, and the letter indicates your situation.

Common Tax Code Letters

Each letter has a specific meaning.
  • •L: Standard Personal Allowance (most common)
  • •M: You've received 10% of your partner's Personal Allowance (Marriage Allowance)
  • •N: You've transferred 10% of your allowance to your partner
  • •T: Other calculations needed to determine allowance
  • •0T: No Personal Allowance (used temporarily or when allowance is used up)
  • •BR: All income taxed at basic rate (20%), usually for second jobs
  • •D0: All income taxed at higher rate (40%)
  • •K: You owe tax from a previous year, being collected through your code

How to Check Your Tax Code

Log into your HMRC Personal Tax Account at gov.uk. You'll see your current tax code and what it's based on. Compare it against your actual circumstances. If you've changed jobs, received benefits, or your personal situation has changed, your code may need updating. HMRC sometimes gets it wrong — checking takes 2 minutes.

What to Do if Your Code Is Wrong

If you think your tax code is incorrect, contact HMRC by phone or through your online account. Common errors include: still being on an emergency tax code after starting a new job, not receiving Marriage Allowance you're entitled to, or old employment income still being factored in. If you've been overtaxed, HMRC will refund you — sometimes going back several years.

Frequently Asked Questions

What does an emergency tax code look like?+

Usually 1257L M1 or 1257L W1. The M1/W1 suffix means you're being taxed on a month-by-month or week-by-week basis rather than cumulatively. It should correct itself once HMRC receives your P45 from your previous employer.

Can I claim Marriage Allowance through my tax code?+

Yes — if one partner earns under £12,570 and the other is a basic-rate taxpayer, you can transfer £1,260 of allowance, saving up to £252/year. Apply on gov.uk.

Why has my tax code changed?+

HMRC updates codes based on information they receive — new employment, benefits changes, pension adjustments. They'll send you a P2 notice explaining the change.

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