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. You will have a separate code for every job or pension you have. HM Revenue and Customs (HMRC) will tell your employer which code to use.
If your tax code changes your employer will receive a new code from HMRC but they won’t know why it has changed. HMRC will write separately to you with a detailed explanation.
Check it online
You can check your tax code using the Income Tax online service within your Personal Tax Account. You’ll need your Government Gateway ID and password to access your account, or you can easily and quickly create an account if you don’t already have one. You can also use the service to check that HMRC have your correct current address – often they don’t, and this is the most common reason for taxpayers not receiving a copy of their coding notices.
The online service is the quickest way to tell HMRC if you think your tax code is wrong – here’s the link you need.
What does the code mean?
Most tax codes are made up of several numbers and a letter.
1257L is the usual code for 2021/22 if you have only one job. It is simply the current personal tax allowance – you tax-free earnings allowance – of £12,570 with the final digit replaced with the letter L.
1257L means that you can earn up to £12,570 / 12 = £1,047.50 per month (or £241.73 per week) tax-free; anything over that will be taxed at 20% (and higher rates if you earn more than the basic rate tax band).
What the other letters mean
M is for Marriage Allowance – you have received 10% of your partner’s personal allowance
N is for a person who has transferred 10% of their allowance to their partner
Employers automatically increase L, M and N codes at the start of each tax year if the personal allowance goes up
T is used when there are other adjustments to your code. Employers can only change a T code when HMRC tells them to.
OT (no allowances) and BR (basic rate) mean you have no tax-free allowance and will pay 20% basic rate tax on all your income
D0 and D1 mean all your income is taxed at 40% or 45% respectively, usually because you have more than one highly paid job or pension
NT means you don’t pay any tax on this income
Codes starting S apply in Scotland and codes starting C apply in Wales
Non-cumulative or “Emergency” tax codes
Normal tax codes are applied to your total year to date earnings since 5th April. In the pay period that your tax code changes, your tax is recalculated for the whole year to date and the cumulative under- or over-payment to date adjusted on your payslip.
This is not always appropriate, so if your code ends W1, M1 or X this signifies an “Emergency Tax Code” and a “Month 1/week 1” basis will apply – the new code will be used on each pay day in isolation, but year to date tax will not be recalculated.
This usually happens when you start a new job and your employer hasn’t received a proper code from HMRC. It should be corrected once HMRC’s records have been updated, or at the latest from the start of the next tax year.
Codes beginning K
K codes mean you have other income that is not being taxed another way and it’s worth more than your personal allowance. A K code therefore represents negative tax allowances and will be added to your pay, not deducted.
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
NOTE: Employers and pension providers cannot take more than half your pre-tax wages or pension when using a K tax code.
For the full tax rates and allowances for 2021/22 refer to our comprehensive Guide
National Insurance category letters also affect your take home pay – check out our explanation here.
