Your UK tax code tells your employer or pension provider how much tax-free income you should receive before Income Tax is deducted through PAYE. If your tax code is wrong, your take-home pay can be wrong too.
This guide explains how UK tax codes work, what common tax codes such as 1257L, BR, D0, D1, NT and K codes mean, and what to do if your payslip shows a tax code you do not recognise.
1. What Is a UK Tax Code?
A tax code is a short code used by HMRC and payroll systems to work out how much Income Tax should be deducted from your pay. It is usually shown on your payslip and may also appear on letters from HMRC or in your online Personal Tax Account.
Most tax codes are made up of numbers and letters. The numbers usually relate to your tax-free allowance, while the letters give extra information about your situation.
For example, the common tax code 1257L normally means that the employee receives the standard Personal Allowance spread across the tax year.
2. How Tax Codes Affect PAYE
PAYE stands for Pay As You Earn. It is the system employers use to deduct Income Tax from your wages before paying you.
Your tax code tells payroll how much tax-free income to apply. If the tax-free allowance is too high, you may underpay tax. If it is too low, you may overpay tax and receive less take-home pay than you should.
Tax codes do not usually affect National Insurance. NI is calculated separately using different thresholds and rules.
3. What Does 1257L Mean?
The tax code 1257L is commonly used for employees who receive the standard Personal Allowance and have no major adjustments to their tax code.
The number 1257 broadly represents £12,570 of tax-free income. Payroll normally spreads this allowance across the year so that part of your pay is tax free each pay period.
However, not everyone should be on 1257L. Your tax code may differ if you have company benefits, unpaid tax from a previous year, multiple jobs, pension income, taxable benefits or a reduced Personal Allowance.
4. Emergency Tax Codes
Emergency tax codes are temporary codes used when HMRC or your employer does not yet have enough information about your income. This often happens when you start a new job, change employer or receive pension income for the first time.
Emergency tax codes can sometimes result in too much tax being deducted, especially if your previous pay and tax details are not yet available.
If the correct information is later received, your payroll may adjust automatically in a future pay period. If not, you may need to contact HMRC.
5. BR, D0 and D1 Tax Codes
Some tax codes mean that all income from a job or pension is taxed at a fixed rate.
- BR usually means all income from that source is taxed at the basic rate.
- D0 usually means all income from that source is taxed at the higher rate.
- D1 usually means all income from that source is taxed at the additional rate.
These codes are common where someone has more than one job or receives pension income alongside employment income. They can be correct, but they can also cause overpayments if HMRC has allocated allowances incorrectly.
6. K Tax Codes Explained
A K code is used when deductions from your tax code are greater than your tax-free allowances. This can happen because of company benefits, unpaid tax from earlier years or other taxable income that HMRC wants to collect through PAYE.
K codes can lead to more tax being deducted from your pay than with a standard tax code, so they are worth checking carefully.
If you have a K code and do not understand why, review your HMRC tax code notice or contact HMRC to check what has been included.
7. What to Do If Your Tax Code Is Wrong
If you think your tax code is wrong, check your payslip first and compare it with your HMRC Personal Tax Account.
Common reasons for incorrect tax codes include:
- Starting a new job
- Having more than one job
- Receiving taxable company benefits
- Changing pension income
- Previous underpaid or overpaid tax
- Incorrect estimated income
If the information is wrong, update HMRC as soon as possible. If too much tax has been deducted, you may receive a refund through payroll or after the tax year ends.
8. Estimate the Impact on Take-Home Pay
Different tax codes can have a significant effect on take-home pay. For example, a standard tax code usually applies a tax-free allowance, while BR, D0 and D1 codes can tax all income from that source.
SalaryHub’s calculator can help you model different tax codes and see how they affect Income Tax, National Insurance and net pay.
Check Your Tax Code Impact
Use the SalaryHub Salary Calculator to estimate your take-home pay using different UK tax codes.
Use the Salary CalculatorFrequently Asked Questions
What is the most common UK tax code?
The most common tax code for many employees is 1257L, but this may not be correct for everyone.
Does my tax code affect National Insurance?
No. Your tax code affects Income Tax through PAYE. National Insurance is calculated separately.
Why has my tax code changed?
Your tax code may change because of a new job, company benefits, pension income, unpaid tax or updated income estimates.
Can I claim money back if my tax code was wrong?
If you have overpaid tax, HMRC may issue a refund or adjust your tax code so the overpayment is corrected through payroll.
Final Thoughts
Your tax code is one of the most important details on your payslip. A small change can affect your monthly take-home pay, so it is worth checking whenever you change jobs, receive new benefits or notice unexpected deductions.