Tax Code

Why Your Tax Code Matters

Your tax code tells your employer how much tax-free income you are entitled to. The standard code for 2025/26 is 1257L, which represents a personal allowance of £12,570 (multiply the number by 10). The letter L means you are entitled to the standard personal allowance.

Other common codes include: BR (all income taxed at basic rate, often used for second jobs), D0 (all income at higher rate), K (you owe tax from a previous year, added to current deductions), and S prefix (Scottish taxpayer). Emergency codes like 1257L W1 or M1 calculate tax on a non-cumulative basis.

If your tax code is wrong, you could be over or under-paying tax all year. Check your code on your payslip or through your HMRC personal tax account. Read our complete guide to tax codes.

How Tax Code Works in Practice

A tax code tells your employer how much tax-free income you are entitled to. The standard tax code 1257L means you receive £12,570 tax-free per year. Different codes apply in various situations: BR (Basic Rate — no allowance), D0 (Higher Rate — no allowance), K codes (negative allowance — you owe tax on benefits), and emergency codes. Scottish residents have codes prefixed with S.

Practical Tips

Always check your tax code when starting a new job, receiving a P2 notice from HMRC, or if your payslip looks wrong. Emergency tax codes (often ending in W1 or M1) mean HMRC does not have your full tax history and may be overtaxing you. If your code is wrong, call HMRC on 0300 200 3300 or use your Personal Tax Account online to request a correction. See all tax codes explained.

Related Topics

Common reasons for incorrect tax codes include having multiple jobs, receiving benefits in kind (company car, private medical), or owing tax from previous years. A wrong tax code can cost you hundreds of pounds in over-deducted tax.