Often, we receive numerous queries on Tax codes, I hope to explain everything here and put you at ease.
Why should I check my Tax Code?
If you work in England under Pay As You Earn (“PAYE”) you will be given a tax code, it is a small alphanumeric sequence. This is used by HM Revenue and Customs (“HMRC”) to tell your employer how much income tax to deduct from your salary.
A wrong code can mean your are paying the incorrect amount of tax, so don't ignore this.
What is a tax code?
A tax code tells your employer via the Pay As You Earn ("PAYE") system, how much tax-free income you are entitled to in a tax year, adjusted for factors like company cars, benefits, or unpaid tax from previous years.
The most common tax code for the 2026/27 tax year is 1257L.
How do I Decode the Numbers and Letters for tax year (2026/27)?
- The Numbers (1257): This represents your Personal Allowance—the amount you can earn tax-free. HMRC usually removes the last digit, so "1257" means a personal allowance of £12,570.
- The Letter (L): This indicates your situation. "L" is standard, meaning you are entitled to the normal tax-free personal allowance.
Common Letters Explained:
- L: Standard tax-free personal allowance.
- M or N: Marriage Allowance applied (you have transferred 10% of your allowance to your partner or received it from them).
- T: HMRC needs to review your record, often because your personal allowance has been reduced (e.g., if you earn over \(£100,000\)).
- BR / D0 / D1: All income is taxed at the Basic (20%), Higher (40%), or Additional (45%) rate, usually when you have a second job.
- K: You have taxable income/benefits exceeding your Personal Allowance, meaning tax is added to your pay rather than deducted from it.
- NT: No Tax deducted.
What if I See “Emergency” Tax Codes?
If you see a “W1” (weekly) or “M1” (monthly) suffix such as 1257L M1- these are emergency codes, its means HMRC doesn't have your full history for the year.
You will generally see this if you change jobs, start a new job without a P45 or become employed after being self-employed.
Impact- it usually means you pay more tax based only on that pay period, this is temporary until HMRC updates your details.
Why has my Tax code changed?
HMRC may change your code if your circumstances change, common reasons are:
- You started or stopped receiving company benefits such as a car benefit or private medical (health) insurance.
- You are paying back tax owed from the previous year.
- Your income has changed, potentially due to triggering the tapering of your Personal Allowance if you earn over £100,000.
How to Check and Fix your Tax code?
- Check your payslip. Look for the code
- Check HMRC App or Online
- Contact HMRC: if you think your code is incorrect, call HMRC on 0300 200 3300 or use online tools to update your details.