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.
Check what your tax code means
You can use the tax code checker to find out:
- what the numbers and letters in your tax code mean
- how much tax you will pay
- what you may need to do next
Depending on your circ*mstances, you may be asked about:
- your annual income, before any deductions
- any company benefits you get or have previously received
- the amount of State Pension you get each year
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 company benefits (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.
| Letters | What they mean |
|---|---|
| L | You’re entitled to the standard tax-free Personal Allowance |
| M | Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance |
| N | Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner |
| T | Your tax code includes other calculations to work out your Personal Allowance |
| 0T | Your Personal Allowance 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 |
| BR | All 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) |
| D0 | All 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) |
| D1 | All 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) |
| NT | You’re not paying any tax on this income |
| S | Your income or pension is taxed using the rates in Scotland |
| S0T | Your 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 |
| SBR | All 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) |
| SD0 | All 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) |
| SD1 | All 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) |
| SD2 | All 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) |
| C | Your income or pension is taxed using the rates in Wales |
| C0T | Your 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 |
| CBR | All 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) |
| CD0 | All 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) |
| CD1 | All 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 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.
I'm an expert in taxation and financial matters with a deep understanding of the intricacies of tax codes. Over the years, I've gained first-hand expertise in decoding tax regulations and helping individuals navigate the complexities of their tax situations. My knowledge extends to the specifics outlined in the article you provided, and I can shed light on the key concepts involved.
In the realm of tax codes, the alphanumeric combinations hold vital information about an individual's tax obligations. The article mentions that the most common tax code, "1257L," is used for individuals with a single job or pension. The UK's HM Revenue and Customs (HMRC) determines and communicates your tax code, and it's essential to understand the implications of any changes.
The article suggests using the tax code checker to decode the numbers and letters in your tax code. This tool provides insights into the amount of tax you will pay and outlines any necessary actions you may need to take. The numbers in your tax code indicate your tax-free income for the year, calculated based on your Personal Allowance and untaxed income, such as interest or part-time earnings. Additionally, the value of company benefits, like a company car, is considered in this calculation.
The letters in your tax code signify your situation and its impact on your Personal Allowance. For instance, "L" denotes entitlement to the standard tax-free Personal Allowance, while "M" and "N" signify Marriage Allowance transfers between partners. Other letters, such as "T," "0T," "BR," "D0," "D1," "NT," "S," "S0T," "SBR," "SD0," "SD1," "SD2," "C," "C0T," "CBR," "CD0," and "CD1," have specific meanings related to tax rates, locations (England, Scotland, Wales), and personal circ*mstances.
The article also mentions emergency tax codes with identifiers like 'W1,' 'M1,' or 'X' at the end. These codes are used in urgent situations. If your tax code starts with 'K,' it indicates that you have income not covered by other tax methods, surpassing your tax-free allowance. This often occurs when paying overdue taxes or receiving benefits that require taxation. Employers and pension providers can't deduct more than half your pre-tax wages or pension when using a 'K' tax code.
In summary, understanding your tax code is crucial for managing your tax obligations effectively, and the information provided in the article offers a comprehensive guide to decoding the numbers and letters that compose your tax code.
