Key facts
- The standard 2025/26 tax code is 1257L, giving a £12,570 Personal Allowance.
- The number in a tax code is your tax-free allowance divided by 10 (then rounded down).
- The letter indicates your situation: L for standard, BR for basic rate only, K for a negative allowance, etc.
- HMRC sends your tax code to your employer — you do not choose it.
- Your code can change mid-year if your circumstances change (new job, benefit in kind, marriage allowance, etc.).
What Is a Tax Code?
A tax code is an instruction from HMRC to your employer (or pension provider) telling them how much Income Tax to deduct from your pay or pension. It determines how much of your income is tax-free and how much is taxable.[1]
Every employee and pension recipient in the UK PAYE system has a tax code. If you have more than one job, each employment has its own code.
Anatomy of a Tax Code
A typical tax code has two parts: a number and one or more letters.[1]
Example: 1257L
- 1257 = your tax-free amount is £12,570 (multiply the number by 10)
- L = you are entitled to the standard Personal Allowance
The Number
The number represents your annual tax-free allowance divided by 10. Your employer uses this to work out how much pay is tax-free in each pay period:
| Tax Code Number | Annual Tax-Free Amount | Monthly Tax-Free Amount | Weekly Tax-Free Amount |
|---|---|---|---|
| 1257 | £12,570 | £1,047.50 | £241.73 |
| 1100 | £11,000 | £916.67 | £211.54 |
| 500 | £5,000 | £416.67 | £96.15 |
The Letter
The letter after the number describes your situation:[1]
| Letter | Meaning |
|---|---|
| L | Standard Personal Allowance |
| M | Marriage Allowance — you have received a transfer from your spouse/civil partner |
| N | Marriage Allowance — you have transferred part of your allowance to your spouse/civil partner |
| T | Your code includes other calculations (e.g. Personal Allowance partially reduced) |
| 0T | No Personal Allowance (e.g. all used up by another employer, or allowance reduced to zero) |
| BR | All income from this job taxed at basic rate (20%) — no tax-free allowance |
| D0 | All income from this job taxed at higher rate (40%) |
| D1 | All income from this job taxed at additional rate (45%) |
| NT | No tax is to be deducted |
| K | You owe more tax than your allowance covers (the number is added to taxable pay, not subtracted) |
| S | Scottish taxpayer (applied before the number, e.g. S1257L) |
| C | Welsh taxpayer (applied before the number, e.g. C1257L) |
How Your Tax Code Is Calculated
HMRC starts with the standard Personal Allowance (£12,570) and then makes adjustments:[2]
| Adjustment | Effect on Tax Code |
|---|---|
| Marriage Allowance (received) | Increased by £1,260 |
| Blind Person’s Allowance | Increased by £3,070 |
| Company car benefit | Reduced by the cash equivalent |
| Medical insurance benefit | Reduced by the premium value |
| Underpayment from previous year | Reduced to collect the debt through PAYE |
| Untaxed income (e.g. small rental income) | Reduced so tax is collected at source |
| State Pension (if also employed) | Reduced by the State Pension amount |
The final figure is divided by 10 and rounded down to give the number in your code.
Example: Personal Allowance of £12,570 minus a £3,500 company car benefit = £9,070. Divided by 10 = 907. Your tax code would be 907L.
How Employers Use Tax Codes
When processing payroll, the employer’s software uses the tax code to calculate the tax due:[3]
- Calculate the employee’s cumulative tax-free pay for the year so far
- Subtract the tax-free pay from cumulative gross pay to get cumulative taxable pay
- Apply the tax bands (20%, 40%, 45%) to the cumulative taxable pay
- Subtract the tax already deducted in previous pay periods
- The result is the tax to deduct this pay period
This cumulative approach means that if your code changes mid-year, the system automatically corrects over- or underpayments from earlier in the year.
When Tax Codes Change
HMRC can change your tax code at any time. Common triggers include:[4]
- Starting a new job or additional employment
- Receiving a benefit in kind (company car, medical insurance, etc.)
- Claiming or cancelling the Marriage Allowance
- HMRC discovering untaxed income from a previous year
- Changes to your State Pension amount
- The start of a new tax year (April)
When your code changes, HMRC sends a coding notice (P2) to you and a P9T notification to your employer.
Frequently Asked Questions
How does HMRC decide my tax code?
HMRC calculates your tax code based on your Personal Allowance (£12,570 for most people), adjusted for any additions (such as the Marriage Allowance or Blind Person’s Allowance) and reductions (such as untaxed income, benefits in kind, or underpayments being collected through your code). The result is divided by 10 to give the number in your code.
What happens if my tax code is wrong?
If your tax code is wrong, you will pay too much or too little tax. You can check your code through your HMRC Personal Tax Account and contact HMRC to have it corrected. If you have overpaid, HMRC will refund the difference either through an adjusted code or a direct payment. If you have underpaid, HMRC may adjust your code for the following year.
Why does my tax code have a W1 or M1 suffix?
W1 (week 1) or M1 (month 1) means your tax is being calculated on a non-cumulative basis — each pay period is treated independently rather than looking at your year-to-date earnings. This is common with emergency tax codes or when HMRC is waiting for information. It usually results in paying slightly more tax until a cumulative code is applied.
Can my tax code change during the year?
Yes. HMRC can change your tax code at any time if your circumstances change. Common triggers include starting a new job, receiving a benefit in kind, claiming the Marriage Allowance, or HMRC discovering untaxed income from the previous year. Your employer will receive the new code via a P9T (tax code notice) and apply it from the next pay period.
Further Reading
- Common Tax Codes Explained — detailed guide to 1257L, BR, 0T, K codes, and more
- Emergency Tax Codes — what to do if you are on a temporary code
- Cumulative vs Week 1 / Month 1 — how the two tax calculation methods differ
- Checking & Correcting Your Tax Code — how to verify and fix your code
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Sources
- Tax codes — GOV.UK
- Check your Income Tax — GOV.UK
- Income Tax rates and Personal Allowances — GOV.UK
- Tell HMRC about a change to your income — GOV.UK