What is a tax code?
Your tax code is used by your employer or pension provider to calculate how much income tax to deduct from your pay. It is set by HMRC and usually appears on your payslip, P60, or P45.
The most common code for 2025/26 is 1257L, which means you have a tax-free personal allowance of £12,570.
How to read your tax code
Tax codes are made up of numbers and letters. The number indicates your tax-free amount (multiply by 10 to get the annual figure). The letter tells HMRC and your employer how to apply that figure:
- L — standard personal allowance
- M — you have received Marriage Allowance from your partner
- N — you have transferred Marriage Allowance to your partner
- T — your allowance includes items HMRC needs to review
- 0T — your personal allowance has been used up, or you have started a new job and HMRC has no details
- BR — all income taxed at basic rate (20%), commonly used for a second job
- D0 — all income taxed at 40%, used for a second job or pension
- D1 — all income taxed at 45%
- NT — no tax to be taken
- K — you have income that is not being taxed another way, such as a company car benefit
- W1 or M1 — emergency code, tax calculated on a non-cumulative basis
Signs your tax code is wrong
Common reasons for an incorrect code include a recent change of job, starting or stopping a company benefit, receiving a state pension alongside employment income, or HMRC applying an estimate that was never corrected.
If your code seems unusual, particularly if it is BR, 0T, or has a K prefix, it is worth checking. An incorrect code could mean you are overpaying tax every month without realising it.
How to get it corrected
You can check and update your tax code through your Personal Tax Account at gov.uk, or by calling HMRC directly. If you have overpaid tax due to a wrong code, you can claim a refund. HMRC can usually go back four tax years.
Common tax code questions
Why does my tax code change every year?
HMRC adjusts tax codes annually to reflect changes in your personal allowance, any benefits in kind, or adjustments from the previous year. You should receive a coding notice (P2) if your code changes. It is always worth checking this against your payslip.
How far back can I claim for an incorrect tax code?
HMRC generally allows refund claims for overpaid tax going back 4 tax years. If you have been on a wrong code for several years, you may be entitled to a significant lump-sum repayment. Our consultants can check your history and submit the claim on your behalf.
What is an emergency tax code and how do I fix it?
An emergency tax code (shown as W1 or M1 after the number) means tax is calculated on a non-cumulative basis — you do not receive credit for any tax-free pay already used earlier in the year. This can result in overpaying significantly. Contact HMRC or your employer to correct it as soon as possible.