List of Tax Codes and What They Mean (UK Guide with Examples)

Sarah had recently started her first “proper” office job after months of juggling irregular retail shifts. She received her first digital payslip, as usual, she ignored the common details and logo and went straight to the bottom line. She was shocked for a moment. The “Take-Home Pay” was much lower than the sum she had joyfully shared with her parents. A big, perplexing series of characters was right next to her name: 1257L. Sarah saw it as a random serial number, not something that should have come into contact with her hard-earned money.

She sat down with her older brother and asked him about that number. Her brother took a look at the payslip and began laughing. “That’s not a serial number, Sarah,” he said; it’s your “tax code’. He advised her to think of it as a ‘permission slip’ for her employer. The numbers showed how much of her income she could keep before tax was taken, and the letter simply meant she didn’t have any extra jobs or special tax adjustments.

For the first time, Sarah recognised that her paycheck was more than just a calculation of hours worked; it was a discussion between her employer and the tax office, and that small code was the only thing keeping her from paying for someone else’s taxes by mistake.

In this blog, you will understand more details about tax code, what it is, list of tax codes and what they mean. Keep reading till the end to increase your knowledge about the tax code.

What Is a UK Tax Code and Why It Matters

A tax code is a short string of numbers and letters, such as 1257L, that your employer or pension provider uses to calculate how much income tax to deduct from your paycheck. Consider it a set of instructions from HM Revenue and Customs (HMRC) to your boss: “Here’s how much this person can earn before you start deducting tax.”

Why does it matter?

If your tax code is incorrect, your total take-home pay will be inaccurate. It is the single most critical component in avoiding overpaying the government or receiving an unexpected tax bill at the end of the year.

• The numbers: The number usually indicates your own allowance. This is the amount you can earn each year without paying income taxes. For most people, the number is 1257, which equals £12,570 in tax-free income.
• The Letters: These inform your employer about your individual status, such as whether you work one or two jobs or receive special tax breaks or state benefits.

Who Gets a Tax Code – and Who Doesn’t

Not everyone in the UK has a tax code, but most people who earn income through PAYE have a tax code.

Who Gets a Tax Code?

You’ll usually have a tax code if:

• You’re an employee paid through payroll
• You receive a workplace or private pension
• You have more than one job
• You receive taxable state benefits
• You’re a company director paid via PAYE

In basic terms, if tax is deducted immediately from your income before it reaches you, you’ll almost always see a tax code. HMRC sends this code to your employer or pension provider to determine how much tax to deduct.

Who Doesn’t Get a Tax Code?

You typically won’t have a tax code if:

• You’re self-employed and only file a Self Assessment tax return
• You earn income that isn’t taxed through PAYE
• You have no taxable income

For example, a sole trader who files their own tax return and pays taxes once or twice a year does not utilise a tax code in the same manner that an employee would.

Where to Find Your Tax Code (And Which One Actually Matters)

There is no need to stress if you don’t know your tax code; it is easy to find.

Where Can You Find It?

You can usually see your tax code in these places:

• Your payslip – It’s normally listed near your name or salary details.
• Your P60 – The annual summary your employer gives you at the end of the tax year.
• Your P45 – If you’ve recently left a job.
• Your Personal Tax Account on the HMRC website.
• Letters or emails sent directly from HMRC.
• If you get a pension, your pension provider will also include your tax code on your payslip.

Which Tax Code Actually Matters?

This is where people get confused.
If you have:

• More than one job
• A job and a pension
• Multiple income sources

You might see different tax codes.
Your primary work normally has a tax code that includes your full tax-free allowance (often 1257L).

Your second employment or additional income could have a different code, such as:

• BR (basic rate tax on all income)
• D0 (higher rate tax)
• 0T (no tax-free allowance applied)

The most important tax code is the one that applies to your primary source of income, as this is where your tax-free allowance is typically spent. If the wrong job uses your allowance, you may find yourself paying more tax than necessary, at least temporarily. That is why it is always important to review not only your tax code, but also where it is being applied.

How UK Tax Codes Are Structured (Numbers and Letters Explained Simply)

If you look at the tax code for the first time, it will be difficult to understand.

A combination of digits and letters like 1257L, BR, or K497 does not sound “simple.”

But once you break it down, it’s actually quite straightforward.

What Do the Numbers Mean?

The numbers in your tax code indicate how much money you can earn before taxes are deducted.
For example: 1257L

Take the number 1257 and add a zero to the end.
This gives you £12,570.
That is the typical tax-free allowance for the majority of persons in the UK.

So, if your code is 1257L, it usually indicates:
You can earn up to £12,570 every tax year before income tax is withheld. If the figure is lower, it signifies your tax-free amount has been lowered (perhaps due to unpaid taxes from the previous year or specific perks). If the number is larger, it signifies you have been allocated an additional allotment.

What Do the Letters Mean?

The letter explains your situation.

Here are some common ones:

• L – You’re entitled to the standard tax-free allowance.
• BR – All your income is taxed at the basic rate (often used for a second job).
• D0 – All income is taxed at the higher rate.
• 0T – No tax-free allowance is applied.
• K – You owe tax or have taxable benefits, so extra tax is being collected.
  
  Think of it this way:
  • The number tells you “how much is tax-free.
  • The letter tells HMRC “what situation you’re in.

Once you understand these two elements, your tax code will no longer be a mystery, but will begin to make sense.

List of Tax Codes and What They Mean (Used by HMRC)

Here are the most common UK tax codes used by HMRC explained in a simple way.

1257L:

This is the most common tax code.
It means:

• You get the standard tax-free amount (£12,570).
• You have one main job or pension.
• No special adjustments are applied.
  For most employees, this is the “normal” tax code.

BR:

This means:

• All your income from this job is taxed at the basic rate (20%).
• You don’t get a tax-free allowance on this income.

Usually used for a second job or extra income.

D0:

This means:
All income from this source is taxed at the higher rate (40%).

Often applied when your total income pushes you into the higher tax bracket.

D1:

This means:

• All income from this job is taxed at the additional rate (45%).

Less common and usually applies to higher earners.

0T:

This means:

• No tax-free allowance is applied.
• Income is taxed at the relevant rate band.

Often used when HMRC doesn’t have enough information about your income yet.

K Codes (e.g., K497):

If your code starts with K, it means:

• You owe tax from a previous year, or
• You receive taxable benefits (like a company car),
• So extra tax is being collected through your salary.

A K code increases the amount of income that is taxed.

NT:

This means:

• No tax is being deducted from this income.
• Used in rare situations where income is not taxable.

Emergency Tax Codes (e.g., 1257L W1, M1, X)

These are temporary codes used when:

• You’ve changed jobs,
• Or HMRC doesn’t have full information yet.

“W1” or “M1” means tax is calculated only for that week or month, not the whole year.

To know more about the emergency tax code, read our blog: Emergency Tax Code UK: Everything You Need to Know and How to Claim a Refund.

How to Tell If You Are on the Wrong Tax Code?

Most people think the tax number is accurate. But sometimes it is not proper, especially after switching jobs, getting an increment, receiving benefits, or starting a second job.

Here’s how you can tell something might be wrong.

• Your Take-Home Pay Suddenly Drops: If your salary has not changed but your take-home pay is lower than normal, your tax bracket may have changed. Check your most recent payslip and compare it to the preceding one.

• You Recently Changed Jobs: When you change jobs, your employer uses information from your P45 or HMRC. If that information is absent or delayed, you may be assigned an emergency code, such as:
  • 0T
  • BR
  • 1257L W1 or M1
    These are often temporary, but they can affect your pay.

• You Have Two Jobs, But Both Use 1257L: Usually, only one employment will use your entire tax-free budget. If both jobs use 1257L, you might end up underpaying tax, which could result in a bill later.

• You have Started Receiving Benefits: If you now receive:
  • A company car
  • Private medical insurance
  • Other taxable benefits
    
    Your tax code may be reduced to collect extra tax. If it hasn’t changed, it may need updating

• You receive a Letter from HMRC: HMRC normally notifies you when your tax code changes. Do not overlook these letters. Check to see if the specifics fit your circumstance.

What to Do If Your Tax Code Is Wrong?

Being on the wrong tax code is more common than individuals realise, especially when switching jobs or having multiple incomes.

What is the good news? It is normally rectified.

Step 1: Check Your Payslip: Look at:

• Your tax code
• Your gross pay
• Any recent changes

Compare it with your previous payslips to see when the change happened.

Step 2: Log Into Your HMRC Personal Tax Account

On the HMRC website, you can:

• See your current tax code
• Check which job is using your tax-free allowance
• Review the information HMRC holds about your income

Sometimes the issue is simply outdated information.

Step 3: Contact HMRC

If the details are incorrect, contact HMRC directly. You may need to confirm:

• Your employer details
• Your estimated annual income
• Whether you have more than one job.

Once updated, HMRC will issue a corrected tax code to your employer.

What About Overpaid or Underpaid Tax?

If you have:

• Paid too much tax: You will usually receive a refund through your payroll (via an updated tax code) or directly from HM Revenue & Customs. If the overpayment is identified after the tax year ends, they may issue a P800 tax calculation confirming the refund due.
  
• Paid too little tax: HMRC may adjust your tax code to collect it gradually.

How E2E Accounting UK Helps You Check and Correct Tax Codes?

E2E Accounting UK makes verifying and correcting your tax code easy and stress-free. Our staff examines your payslips and current tax code to guarantee that your tax-free allowance is properly applied and that you are not overpaying or underpaying taxes. If you have changed jobs, established a second income, or received taxable benefits, we will determine whether your tax code accurately reflects your current position. Where necessary, we work directly with HMRC to request revisions and assist you with any refunds or adjustments. Instead of second-guessing your pay slip, you will get straightforward guidance and practical assistance to safeguard your take-home earnings.

Conclusion

We had begun this blog with a short story of Sarah, who was unaware about the tax code. Sarah assumed 1257L was merely a random code displayed next to her name. The number was confusing, complicated and simple to overlook. But it’s a good thing Sarah didn’t ignore the number carelessly.

That little tax code on your payslip is more than just a payroll detail; it determines how much of your income is tax-free and whether you are paying the correct amount of tax. Many people only realise it when their take-home pay decreases, or they receive an unexpected tax bill, but understanding it beforehand might help them avoid costly mistakes. So, the next time you check your payslip, take a moment to analyse that code, and if anything is unclear, seek professional assistance to protect your hard-earned money.

People Also Ask: