Look at your payslip. See that code—probably 1257L? That's not random. It tells your employer exactly how much to deduct from your wages each month. Get it wrong and you're either overpaying (losing hundreds) or underpaying (HMRC will want it back, with interest). Let's decode it.

What's a Tax Code Actually Doing?

Your tax code is HMRC's way of telling your employer how much of your salary is tax-free. That's it. The rest gets taxed at 20%, 40%, or 45% depending on how much you earn.

Here's the thing most people don't know: your employer doesn't decide this. HMRC sends them your tax code, and they just follow orders. If the code's wrong, you're stuck with incorrect deductions until you fix it.

Breaking Down the Most Common Code: 1257L

1257L is the standard code for 2024/25. Here's what it means:

1257 = Your personal allowance is £12,570 (multiply by 10)
L = You get the standard tax-free Personal Allowance

That's £12,570 you can earn without HMRC taking a penny. Earn more? They take 20% on the excess (if you're a basic rate taxpayer).

Real Example

Salary: £30,000

Tax-free: £12,570
Taxable: £17,430
Tax owed: £17,430 × 20% = £3,486 per year (£290 per month)

Simple, right? But wait until you see the weirder codes.

The Letters: What They Mean for Your Money

L - Standard Allowance

You're entitled to the full £12,570 personal allowance. Most people have this.

M - Marriage Allowance Received

Your partner's transferred 10% of their personal allowance to you. You get an extra £1,260 tax-free (saving you £252 annually). Learn more about claiming Marriage Allowance.

N - Marriage Allowance Transferred

You've given 10% of your personal allowance to your spouse. Your tax-free amount drops to £11,310.

T - Other Adjustments

This gets messy. HMRC's made calculations based on things like company benefits, other income, or tax owed from previous years. You'll need to check your PAYE coding notice to see what they're doing.

0T - No Personal Allowance

Your personal allowance has been used up entirely. Common scenarios:

You earn over £125,140 (allowance tapers to zero above £100k)
You've started a new job and your employer doesn't have your details yet
You're on emergency tax (temporarily)

This hurts. If you're on 0T and shouldn't be, you're bleeding tax every month.

BR - Basic Rate (20%)

All your income from this source is taxed at 20%. No personal allowance applied. Usually happens when you have a second job or pension.

D0 - Higher Rate (40%)

Everything taxed at 40%. Used for second incomes when you're already a higher-rate taxpayer. See our higher rate taxpayer guide for planning strategies.

D1 - Additional Rate (45%)

All income taxed at 45%. For additional-rate taxpayers with multiple income sources.

NT - No Tax

Lucky you. You're not paying tax on this income. Rare, usually applies to very specific circumstances.

K Codes: When You Owe Money

Here's where it gets interesting. K codes mean you OWE HMRC money, and they're collecting it through your wages.

Example: K500

Instead of tax-free income, you have NEGATIVE allowance
You owe £5,000 (multiply 500 × 10)
This gets added to your taxable income

Why You Might Have a K Code

Company car: Taxable benefit worth £5k+ per year
Private medical insurance: Another taxable perk
Tax owed from previous years: HMRC's collecting arrears
State pension while still working: Creates tax complications

K codes can be brutal. Your effective tax rate shoots up because you're paying tax on your salary PLUS the benefit value.

Emergency Tax Codes: The Temporary Nightmare

Started a new job? You might get hit with an emergency code:

1257L W1/M1

W1 = Week 1 basis
M1 = Month 1 basis

This means you're taxed each week or month independently, without spreading your allowance across the full year. You'll usually overpay and need to claim a refund.

What triggers this?

New employer doesn't have your P45
You've got multiple jobs
HMRC doesn't have current info

Fix it fast. Give your employer your P45 from your previous job. If you don't have one, fill in the starter checklist accurately.

What Changes Your Tax Code?

Your code isn't set in stone. It changes when your circumstances do:

Things That Increase Your Allowance

Claiming Marriage Allowance
Work expenses approved by HMRC
Professional subscriptions

Things That Decrease It

Company benefits (car, medical, gym)
Second job income
State pension starting
Unpaid tax from previous years

HMRC will send you a PAYE Coding Notice explaining changes. Read it. Seriously—people lose hundreds because they bin these letters without checking.

How to Check If Yours Is Wrong

Red Flags

Your tax code changed and you don't know why
You've got a K code you didn't expect
You're on emergency tax (W1/M1) for more than a month
Your payslip deductions seem way off

Where to Find Your Code

Your payslip (every month)
PAYE Coding Notice from HMRC
Personal Tax Account on GOV.UK
P45 from previous employer

If It's Wrong

Log into your Personal Tax Account (gov.uk/personal-tax-account)
Check what HMRC thinks your circumstances are
Update any incorrect info
Call HMRC (0300 200 3300) if it's complicated

Don't wait. If you're overpaying, you're lending HMRC free money. If you're underpaying, they'll want it back eventually—possibly in one lump sum.

Scottish Tax Codes: The Weird Cousin

Scottish taxpayers get an S prefix: S1257L

Same rules apply, but you'll pay different tax rates once you're above the personal allowance. Scotland has six tax bands instead of three, and rates can be higher for middle and high earners.

The 60% Tax Trap (For High Earners)

Earn between £100k-£125k? Welcome to HMRC's special hell.

You lose £1 of personal allowance for every £2 you earn over £100k. This creates an effective tax rate of 60% on income in that band (40% income tax + 20% from losing your allowance). Read our complete guide to the £100k tax trap to understand how to avoid it.

Example: Earn £110k

Personal allowance reduced to £7,570
Effective rate on that £10k = 60%

Tax code might show: 757L or similar (reduced allowance)

Common Tax Code Mistakes

The Second Job Problem

You take a second job. Your main job has code 1257L (using your full allowance). Your second job should be BR (basic rate, no allowance). But sometimes employers mess up and both try to use your allowance.

Result? You underpay tax all year, then owe a lump sum later.

The Emergency Code That Never Ends

You start a new job on emergency tax. Fine for month one. But if it's still there in month three, you've overpaid by hundreds. Employer hasn't sent your details to HMRC, or you haven't provided your P45.

Fix: Chase your employer. Hard.

The Company Car Surprise

Your employer gives you a company car. Nice! Tax code changes to K400. Less nice. You're now paying tax on the benefit-in-kind value.

People don't expect this. The car isn't "free"—you're paying tax on it monthly.

Quick Diagnostic: What's Your Code Telling You?

Standard employee, one job, no benefits: Should be 1257L

Second job or pension: Probably BR, D0, or D1

Company car or benefits: Likely a K code or T code with reduced number

Scottish resident: S1257L (or variant)

Emergency tax: 1257L W1/M1 or 1257L X

Bottom Line

Your tax code isn't boring paperwork—it's the difference between keeping your money and giving HMRC an interest-free loan. Check it. Understand it. Fix it if it's wrong.

Use our free tax calculator to see how different codes affect your take-home pay. Plug in your salary and code, and we'll show you exactly what you're paying.

And for the love of all that's holy, read your PAYE Coding Notice when it arrives. Five minutes reading could save you hundreds in overpaid tax.

Disclaimer: Tax codes can be complex, and individual circumstances vary. This guide covers common scenarios, but if you're unsure about your code or have unusual circumstances, contact HMRC or consult a tax advisor.

UK Tax Codes Explained: What 1257L, K500, and BR Actually Mean