A PAYE tax code tells an employer or pension provider how much tax free pay to allow and which rates to use. For 2026 to 2027 most people with one job or pension have code 1257L, meaning the standard £12,570 Personal Allowance; the number is the tax free amount with the last digit removed, and the letters and prefixes describe your circumstances. HMRC decides the code and tells the payroll which one to use.

What is a tax code in law?

Regulation 7 of the Income Tax (PAYE) Regulations 2003 defines a code as a combination of letters, numbers or both used with the tax tables to establish free pay, plus a set of special codes such as the basic rate code, the nil tax code, the 0T code and the emergency code. The same regulation defines a K code, an S code (Scottish rates) and a C code (Welsh rates). You receive a separate code for each employment or pension.

You can find your code in your HMRC online account, on the HMRC app, on your payslip, or on a Tax Code Notice letter.

How is the number worked out?

HMRC starts with your Personal Allowance, deducts income that is not taxed elsewhere and other amounts it needs to collect, then replaces the final digit with a letter. Things that reduce the tax free amount include:

  • company benefits, such as a company car or medical insurance;
  • untaxed income, such as savings interest above your allowances or part time earnings;
  • the High Income Child Benefit Charge, if you pay it through your wages or pension;
  • tax owed from an earlier year that HMRC is collecting through PAYE.

Claims for tax relief on job expenses and receiving Marriage Allowance increase it.

Examples

HMRC’s own example: an employee entitled to £12,570 receives medical insurance worth £1,570. The tax free amount becomes £11,000 and the code is 1100L.

Illustration only. An employee has a company car benefit of £4,000 and HMRC estimates £300 of untaxed savings interest. Starting from £12,570, the tax free amount is £8,270 and the code is 827L. If the benefits added up to more than £12,570, the code would become a K code.

For how benefits are reported and taxed, see payrolling benefits in kind and benefits in kind and P11D.

What do the letters and prefixes mean?

Code Meaning
L Entitled to the standard Personal Allowance
M Marriage Allowance: received 10% of a partner’s Personal Allowance
N Marriage Allowance: transferred 10% of your Personal Allowance to a partner
T The code includes other calculations to work out your Personal Allowance
0T Personal Allowance used up, or a new employer does not have the details needed
BR All income from this job or pension taxed at the basic rate
D0 All income from this source taxed at the higher rate
D1 All income from this source taxed at the additional rate
NT No tax is deducted from this income
K Untaxed income or deductions exceed the Personal Allowance
S prefix Scottish rates apply (for example S1257L, SBR, SD0 to SD3)
C prefix Welsh rates apply (for example CBR, CD0, CD1)

BR and D codes are usually used on a second job or pension, where the allowance is already used against the main source. In Scotland SD0 means the intermediate rate, SD1 the higher rate, SD2 the advanced rate and SD3 the top rate; see Scottish Income Tax rates and bands. The M and N suffixes are explained in Marriage Allowance explained.

How does a K code work?

A K code means income or deductions that are not taxed elsewhere exceed your tax free Personal Allowance. Instead of giving free pay, the code adds an amount to your taxable pay. Typical causes are a large company car benefit, State Pension or taxable state benefits being collected through another source, tax owed from an earlier year, or savings interest above the Personal Savings Allowance.

There is a safeguard. Employers and pension providers cannot deduct more than half of your pre tax pay or pension when using a K code. This is the overriding limit, defined in regulation 2 of the PAYE Regulations as 50% of the relevant payment.

What is an emergency tax code?

You are on an emergency code if the code ends in W1 (paid weekly, for example 1257L W1), M1 (paid monthly, for example S875L M1) or X (pay dates vary), or if your payslip shows NONCUM. Normally tax is cumulative: each payday the payroll looks at your pay and tax for the year to date. On an emergency code it looks only at that week or month, as if you were paid that amount every period, which can mean paying the wrong amount of tax.

Emergency codes are common when you start a job without a P45, or start receiving company benefits or the State Pension. HMRC usually updates the code once it has details from both employers, which can take up to 35 days from the start date. If you have underpaid, you may stay on the emergency code until the correct tax is paid for the year, and you move to a normal code in the new tax year.

Why does a tax code change during the year?

HMRC changes a code when it needs you to pay a different amount, for example when you start a new job or a second job or pension, receive taxable state benefits, start or stop company benefits, claim expenses or Marriage Allowance, pay the High Income Child Benefit Charge through PAYE, or when your savings interest exceeds your Personal Savings Allowance.

Collecting Self Assessment through your code

HMRC will collect a Self Assessment balance through your code automatically if all of these apply:

  • you owe less than £3,000 (a part payment to get below £3,000 does not count);
  • you already pay tax through PAYE;
  • you filed a paper return by 31 October or an online return by 30 December.

It will not do so if you would pay more than 50% of your PAYE income in tax, or more than twice your normal tax. The debt is collected in equal instalments over 12 months. You can opt out on your return. The filing dates themselves are in Self Assessment deadlines and penalties.

What should you do if your code looks wrong?

Most wrong codes come from HMRC having incorrect or missing information about your income, benefits or expenses. Use the Check your Income Tax online service to review employment, pension, estimated income and benefits, and update anything wrong. If the code needs changing, HMRC tells you and your employer within 15 working days. The new code should appear on your next or following payslip if you are paid monthly, or by your third payslip if paid weekly.

If you have overpaid, HMRC asks your employer or pension provider to refund the difference through pay once it has your income details. If you have underpaid, it adjusts your code to collect the tax over one or more years where possible. After starting a new job, wait 35 days before contacting HMRC. Agents can use the PAYE Coding Notice query form.

What mistakes do employers and employees make?

  • Employers ignoring a new code. The payroll should apply the latest code HMRC sends, not keep using 1257L.
  • Not giving a new employer the P45. This is the main cause of emergency codes.
  • Assuming 1257L is always right. If you have benefits, untaxed interest or a second job, the standard code may undercollect and lead to a bill later.
  • Splitting allowances by accident. With two jobs the allowance normally goes against the main one, and the second usually has BR or a D code.
  • Ignoring the savings estimate. HMRC estimates this year’s interest from last year’s figure; see tax on savings interest and the Personal Savings Allowance.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.