Your tax code tells your employer how much income tax to deduct from your pay. It is based on your Personal Allowance and any adjustments HMRC has made (such as benefits in kind, underpaid tax from previous years, or additional allowances). Getting the right code means you pay the correct amount of tax throughout the year — not too much, not too little.
The most common tax code: 1257L
The standard tax code for 2026/27 is 1257L. This means you have a Personal Allowance of £12,570 (the number in the code multiplied by 10). The "L" suffix means you are entitled to the standard Personal Allowance.
If your code is 1257L, your employer will not deduct any tax on the first £12,570 of your annual earnings. Everything above that is taxed at the applicable rates (20%, 40%, or 45%).
How to read a tax code
Most tax codes have a number followed by a letter. The number represents your tax-free allowance (multiply by 10 to get the actual amount). The letter indicates your situation:
| Letter | Meaning |
|---|---|
| L | Standard Personal Allowance |
| M | Marriage Allowance — you received a transfer from your partner |
| N | Marriage Allowance — you transferred part of your allowance to your partner |
| T | HMRC needs to review your code (other calculations involved) |
| K | Your deductions (e.g. benefits in kind) exceed your allowance — tax is added to your income |
| S | Scottish rate taxpayer (followed by the code number/letter, e.g. S1257L) |
| C | Welsh rate taxpayer (followed by the code number/letter, e.g. C1257L) |
Special tax codes
Some codes do not have a number and apply a flat rate to all your income from that employment:
- BR — all income taxed at 20% (Basic Rate). Used when your Personal Allowance is applied against another job.
- D0 — all income taxed at 40% (Higher Rate).
- D1 — all income taxed at 45% (Additional Rate).
- 0T — no Personal Allowance. Tax is calculated using all bands but with a zero-tax-free amount. Often used as an emergency code.
- NT — no tax deducted at all.
Emergency tax codes
If you start a new job and your employer does not have your P45 or correct tax code, they may apply an emergency code — typically 1257L W1 or 1257L M1. The "W1" (week 1) or "M1" (month 1) suffix means the code is applied on a non-cumulative basis: each pay period is treated independently instead of taking into account your year-to-date earnings.
This usually means you overpay tax in the early months. Once HMRC issues your correct cumulative code, your employer will refund the overpaid amount through your payslip — you do not need to do anything.
K codes: when your allowance is negative
A K code means HMRC is collecting additional tax through PAYE — usually because you receive taxable benefits (company car, private medical insurance) or owe tax from a previous year. The number after K represents the amount being added to your taxable income (multiplied by 10).
For example, K500 means £5,000 is being added to your taxable income. There is a cap: tax collected via a K code cannot exceed 50% of your pay in any pay period.
What to do if your tax code is wrong
- Check your code on your payslip or in your HMRC Personal Tax Account online.
- If it looks wrong, contact HMRC directly — your employer cannot change your code; only HMRC can issue a new one.
- Common reasons for an incorrect code: your employer has not reported a benefit in kind ending, HMRC has estimated income incorrectly, or Marriage Allowance is still being applied after a separation.
- If you have overpaid tax due to a wrong code, you can claim a refund through HMRC or it will be corrected through a new code automatically.
See the effect of your tax code
Our income tax calculator lets you enter a custom tax code to see exactly how it affects your take-home pay. Try inputting your salary with code 1257L, then compare it against a K code or BR to understand the difference.