UK tax codes and what they mean

Millions of people are over or underpaid each month because they’re on the wrong tax code. We explain how to check your tax code and what the different tax codes including 1257L and BR mean.

Your tax code is a simple series of numbers and letters which your employer or pension provider use to work out how much income tax to take from your wages or pension.

There are a number of reasons why you may be on the wrong tax code but it could mean you are owed money, or may even mean that you owe money to HMRC.

In this article, we cover:

Related content: Use our income tax calculator to work out your take-home pay.

What is a tax code and how do I check mine?

Your tax code tells your employer or pension provider how much to take in income tax from your wages or pension. 

It is issued by HMRC to everyone on the PAYE (pay as you earn) system. You don’t choose your own code. 

PAYE is simply a way for HMRC to collect your income tax and national insurance directly from your pay as you go along, rather than through an annual tax return that you sort out yourself. 

Part-time and full-time workers, plus those who receive a private pension will therefore have a tax code. If you are fully self-employed and all your income is taxed through self-assessment, you will not have one.

If you’re on the wrong tax code, you could be paying too little or too much tax. It is your responsibility, not your employer, to pay back any money you owe to HMRC.

How do I check my tax code?

There are a number of places that you can find your tax code:

• Your payslip
• P45 – the form you get from your employer when you leave your job
• P60 – your annual tax review from your employer
• A dedicated page on the gov.uk website – you’ll need to sign in to or register for a government gateway ID
• HMRC’s app
• On a “tax code notice” letter from HMRC if you get one
• The HR department at your work
• Your pension advice slip

What are the different tax codes?

A tax code is a combination of numbers and letters. The numbers represent the tax-free earnings you are entitled to in a particular pay period. 

Most people who pay tax in the UK are entitled to a personal allowance, which is currently £12,570 for the current tax year. If you have no other income, you can earn up to this amount without having to pay any tax. 

This figure may be higher if you claim marriage allowance or blind person’s allowance. However, you will not get any personal allowance if you earn more than £125,140 a year.

Anyone who has just one job or pension and who earns less than £100,000 a year (and has no taxable employment perks such as a company car), will usually have the standard tax code of 1257L. 

The income tax that you need to pay is then calculated by your employer on the balance over your tax-free allowance. 

What does my tax code mean?

The letters at the end of your tax code relate to your situation and how it affects the amount that you can earn tax-free. 

There are also additional letters at the front if you live in Scotland (S) or Wales (C), such as S1257L or C0T.

Here’s what the letters mean:

• L = you are entitled to a tax-free personal allowance
• BR = usually for a second job or pension where you are entitled to no personal allowance because it is assumed that it is already being used on your main job. You will need to pay 20% basic-rate tax on the whole amount. Make sure that you inform HMRC which is your main job.
• D0 = As above but all income is taxed at the 40% higher rate (21% intermediate rate in Scotland)
• D1 = As above but all income is taxed at the 45% additional rate (41% higher rate in Scotland)
• 0T = you are not entitled to any tax-free personal allowance and your income is taxed in line with income tax bands, e.g. you earn more than £125,140 (see below)

• SD2 = Only used in Scotland, usually for a second job or pension.You’re not entitled to any tax-free personal allowance and all income is taxed at the top rate of 46%.
• K = You have a negative personal allowance, e.g. you might be paying back tax that you owe from a previous year or receiving taxable work benefits which are worth more than (or you’re not entitled to) the personal allowance
• M or N = If you or your spouse/civil partner have received (M) or been given (N) the marriage tax allowance. Non-taxpayers are able to transfer £1,260 of their personal allowance to their basic-rate tax-paying spouse or civil partner.
• NT = No tax is paid on the work or pension income. 
• T = Typically for more complex tax affairs, which need to be reviewed by HMRC. If a T follows a number that isn’t zero, you will be entitled to a personal allowance of that figure. 

Am I being emergency taxed?

You might notice letters and numbers such as W1, M1 or X after your tax code on your payslip. For example, your tax code might be:

• 1257L W1 if you are paid weekly 
• Or 1257L M1 if you are paid monthly
• Or an X might be used if you pay isn’t standard

These are all emergency tax codes. 

HMRC will automatically put you on an emergency tax code when it doesn’t have accurate details about how much tax you need to pay. For example, if you have just started a new job. 

Depending on what information the tax office has about you, you will pay tax:

• Just on the amount that exceeds the personal allowance (£12,570 in 2022/23)
• At 20% basic rate of tax on your entire pay packet if HMRC believes you have no personal allowance (BR tax code)
• At 40% higher rate on your entire pay packet (OT tax code)

It’s likely that your tax code will only be different for a short amount of time. This is a temporary measure until HMRC gathers the required information from your employer about how much you are earning. Your code will then be adjusted accordingly.

If your change in circumstances means you have not paid the right amount of tax, you will stay on the emergency tax code until you’ve paid the correct tax for the year.

Why have I been put on an emergency tax code?

There are a number of reasons why you might be paying emergency tax, including:

• Starting a new job
• Recently moving from being self-employed to employed
• Starting or stopping receiving benefits from your job
• Receiving taxable state benefits
• Claiming marriage allowance or expenses that you get tax relief on

You might find that you are paying more tax than necessary if you have been given an emergency tax code that excludes the £12,570 personal allowance, such as BR.

If this is the case you will be losing tax relief on that amount. In the 2022/23 tax year you could be paying extra depending on your income:

• Basic-rate taxpayers 20% (up to £50,270) = £2,514
• Higher-rate taxpayers 40% (up to £100,000) = £5,028

The higher-rate tax band is actually up to £150,000, after which you will pay an additional rate of tax at 45%.

However, due to a quirk in the system, anyone earning more than £100,000 begins to steadily lose the £12,570 personal allowance by £1 for every £2 they earn above that figure. 

At £125,140, you lose the tax-free personal allowance altogether.

What are the tax codes and rules for students?

If you’re a full-time student with a part-time job then you might need to pay income tax and national insurance.

If you earn more than £190 a week then you will have to pay national insurance. You also have to pay income tax if you earn more than £1,042 a month, or £12,570 a year, which is your personal allowance.

Your employer will usually deduct both income tax and national insurance from your wages through pay as you earn (PAYE).

But if you only work during the holidays then it’s possible that you won’t pay tax through PAYE. Instead your employer will probably need to fill out a form called P38.

This only applies if the following conditions are met:

• You are a full-time student in the UK who only works during the holidays
• You are returning to full-time education after the holiday
• Your total income for the year is below the personal allowance

It is the responsibility of your employer to deal with the paperwork so that you don’t overpay tax.

Why has my tax code changed?

Your tax code should be adjusted by HMRC depending on your circumstances. 

But millions of people find themselves on the wrong tax code each year, which could have a big impact on their finances.

It is important to check that you are on the correct code and let HMRC know as soon as possible if you believe it to be wrong.

You can report a change in your income and circumstances by either:

If you check online, you will need to register for a government gateway ID.

Why is my tax code wrong?

There are a number of reasons why you might be on the wrong tax code, meaning that you are paying the wrong amount of tax.

This includes:

1. You have started your first job and HMRC has no record of you
2. You have changed jobs recently and HMRC may believe that you have two jobs so has put you on an emergency tax code which removes your personal allowance
3. You have changed from self employed to employed or part-time to full-time
4. You have more than one income stream or pension, for example you have two jobs
5. Your employer was using the wrong code
6. You receive or have stopped receiving certain benefits, such as benefits from your job or taxable state benefits or you claim marriage Allowance
7. You claim expenses that you get tax relief on
8. You have recently retired

Will get a tax refund if my code is wrong?

If HMRC believes that you have overpaid tax because you have been on the wrong code, they will refund you the tax automatically – you do not need to make a claim. 

Your employer will be contacted by HMRC and you should get any money owed in your next payslip.

Depending on how long you have been overpaying for and how much, you could receive thousands of pounds back. 

You can claim back up to four years, meaning that you can go back as far as the 2018/19 tax year.

If you spot that you are on the wrong code, you could speed up the process by using HMRC’s online income tax checker, or calling 0300 200 3300.

What if I have been underpaid tax?

It is usually up to the employee to pay any unpaid tax if there are any errors. 

HMRC will usually send you a tax calculation (a P800) for a tax year if you have not paid enough tax.

Always check the P800 calculation carefully using your own records, such as on your P45 or P60, as HMRC can get their numbers wrong.

If you notice that you are paying the wrong amount of tax, contact HMRC as soon as you can in order to avoid a bigger tax bill later on.

If you owe tax to HMRC but cannot afford to do this in one lump sum, you could organise a payment schedule – for example, spreading the owed money over a period a year.

If the underpayment was not your fault, the tax may be written off. For example is your employer did not operate PAYE properly. If you believe this is the case then contact HMRC and ask for a so-called “extra statutory concession” or an A19. 

Remember, it is important to make sure that HMRC have the latest personal details for you at all times. If your circumstances have changed, go to gov.uk.