A Complete Guide to Understanding Your Tax Code

Tax Code

The source of this article is www.gov.uk/tax-codes

Overview

Your tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension. HM Revenue and Customs (HMRC) will tell them which code to use.

Find your tax code

You can find your tax code:

What your tax code means

Your tax code is made up of numbers and letters.

1257L is the tax code currently used for most people who have one job or pension.

HMRC will usually contact you to explain how they worked out your individual tax code if your tax code changes.

What the numbers mean

The numbers in your tax code tell your employer or pension provider how much tax-free income you get in that tax year.

HMRC works out your individual number based on your tax-free Personal Allowance and income you have not paid tax on (such as untaxed interest or part-time earnings). They also consider the value of any benefits from your job (such as a company car).

What the letters mean

Letters in your tax code refer to your situation and how it affects your Personal Allowance.

LettersWhat they mean
LYou’re entitled to the standard tax-free Personal Allowance
MMarriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance
NMarriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner
TYour tax code includes other calculations to work out your Personal Allowance
0TAll your income from this job or pension is taxed at a higher rate (usually used if you’ve got more than one job or pension)
BRAll your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
D0All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
D1All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)
NTYou’re not paying any tax on this income
SYour income or pension is taxed using the rates in Scotland
S0TYour Personal Allowance (Scotland) has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code
SBRAll your income from this job or pension is taxed at the basic rate in Scotland (usually used if you’ve got more than one job or pension)
SD0All your income from this job or pension is taxed at the intermediate rate in Scotland (usually used if you’ve got more than one job or pension)
SD1All your income from this job or pension is taxed at the higher rate in Scotland (usually used if you’ve got more than one job or pension)
SD2All your income from this job or pension is taxed at the top rate in Scotland (usually used if you’ve got more than one job or pension)
CYour income or pension is taxed using the rates in Wales
C0TYour Personal Allowance (Wales) has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code 
CBRAll your income from this job or pension is taxed at the basic rate in Wales (usually used if you’ve got more than one job or pension) 
CD0All your income from this job or pension is taxed at the higher rate in Wales (usually used if you’ve got more than one job or pension) 
CD1All your income from this job or pension is taxed at the additional rate in Wales (usually used if you’ve got more than one job or pension)

If your tax code has ‘W1’ or ‘M1’ or ‘X’ at the end

These are emergency tax codes.

If your tax code has a ‘K’ at the beginning

Tax codes with ‘K’ at the beginning mean you have income that is not being taxed another way and it’s worth more than your tax-free allowance.

For most people, this happens when you’re:

  • paying the tax you owe from a previous year through your wages or pension
    getting benefits you need to pay tax on – these can be state benefits or company benefits

Your employer or pension provider takes the tax due on the income that has not been taxed from your wages or pension – even if another organisation is paying the untaxed income to you.

Employers and pension providers cannot take more than half your pre-tax wages or pension when using a K tax code.

Emergency tax codes

If you’re on an emergency tax code your payslip will show:

  • 1257 W1
    1257 M1
    1257 X

This means you’ll pay tax on all your income above the basic Personal Allowance.

You may be put on an emergency tax code if HMRC does not get your income details in time after a change in circumstances such as:

  • a new job
  • working for an employer after being self-employed
  • getting company benefits or the State Pension

Emergency tax codes are temporary. HMRC will usually update your tax code when you or your employer give them your correct details. If your change in circumstances means you have not paid the right amount of tax, you’ll stay on the emergency tax code until you’ve paid the correct tax for the year.

Updating your details

Your employer can help you update your tax code by sending details about your previous income or pension to HMRC.

If you’ve started a new job

Give your employer your P45 from your previous job. If you do not have a P45, your employer should ask you for the information they need instead.

If you’ve started working for an employer after being self-employed

Your employer should give you a ‘starter checklist’ – this is a form you can use to give them details about your previous employment.

If you’ve started getting company benefits or the State Pension

Check your tax code online to make sure it includes the State Pension or company benefit. If they’re not included, update your details in the tax code online service or by contacting HMRC.

The emergency tax code will stay in place until the end of the tax year. This means you’ll pay the right amount of tax for the current tax year. In the new tax year, HMRC will put you on a regular tax code.

Why your tax code might change

HMRC may update your tax code if:

You may also be put on an emergency tax code if you change jobs.

Getting help with your new tax code

If your tax code has changed, you can use the Get help understanding your tax code tool to find out:

  • how this will change the amount of tax you pay
  • what you may need to do next

Depending on your circumstances, you may be asked about:

Sign into your personal tax account to check or update your details with HMRC.

How to update your tax code

In most cases, HMRC will automatically update your tax code when your income changes. They’ll usually get this information from your employer.

If HMRC has the wrong information about your income, you may be given an incorrect tax code.

To correct your tax code, make sure HMRC has up-to-date details about your income.

Check what you need to do if you’re on an emergency tax code.

If you think your tax code is wrong

If you think your tax code is wrong, you can use the check your Income Tax online service to:

  • update your employment details
  • tell HMRC about a change in income that may have affected your tax code

Tell HMRC about a change in income

You can report a change in your income by either:

If you’re contacting HMRC on someone else’s behalf

If you need to tell HMRC about a change in someone else’s income (for example, because you’re their accountant) fill in a PAYE Coding Notice query form.

After you report your change

HMRC will contact you if they change your tax code.

They will also tell your employer or pension provider that your tax code has changed.

Your next payslip should show:

  • your new tax code
  • adjustments to your pay if you were paying the wrong amount of tax

Get a tax refund or pay the tax you owe

If HMRC update your tax code and you’ve paid too much or too little tax, HMRC will send you either: