A tax code tells your employer how much of your pay is tax-free and which rate applies to the rest. Built under the Income Tax (PAYE) Regulations 2003[3], it is a number times ten (your tax-free Personal Allowance) followed by a letter that signals the rule. For 2026/27 the standard code is 1257L: £12,570 tax-free, then the PAYE bands apply. The wrong code over- or under-deducts every payday until HMRC corrects it.
What does each tax code letter mean?
| Code / letter | What it means | Typical situation |
|---|---|---|
| 1257L | Standard £12,570 Personal Allowance, then PAYE bands | Most single-job employees in 2026/27 |
| L | Entitled to the standard tax-free Personal Allowance | Default suffix |
| M | Received 10% of a partner's allowance via Marriage Allowance | Lower earner whose partner transferred allowance |
| N | Transferred 10% of your allowance to a partner | You gave allowance to your partner |
| BR | All pay from this job taxed at basic rate (20%), no allowance | Usually a second job or pension |
| D0 | All pay taxed at higher rate (40%) | Second income for a higher-rate taxpayer |
| D1 | All pay taxed at additional rate (45%) | Second income for an additional-rate taxpayer |
| 0T | No Personal Allowance left, or new job with no details | Allowance used up, or P45 missing |
| K | Untaxed income exceeds your allowance, so extra tax is collected | Company benefits or owed tax loaded into the code |
| NT | No tax taken from this income | Specific exempt cases |
| T | Code includes other calculations to work out your allowance | Income over £100,000 taper, complex cases |
| S prefix | Scottish income tax rates apply (e.g. S1257L) | Main home in Scotland |
| C prefix | Welsh income tax rates apply (e.g. C1257L) | Main home in Wales |
How is the number worked out?
Drop the last digit and you have your tax-free amount: 1257 means £12,570. HMRC starts from the Personal Allowance, then adjusts for things that change it, untaxed company benefits, a state pension, or allowance owed from an earlier year. A K code[5] flips the logic: deductions outweigh the allowance, so the number is added to your taxable pay instead of subtracted. This matters because a code that is too high quietly underpays tax all year, leaving a bill at reconciliation.
Why might my code be wrong?
Codes lag real life. Changing jobs, a second income, starting or stopping company benefits, or an HMRC estimate that misses the mark all push the code off. A code ending W1, M1 or X is an emergency code and usually means you are overpaying. Check the code on every payslip against your circumstances; if it looks wrong, your HMRC personal tax account[6] shows the current code and lets you query it. PAYE is cumulative, so a corrected code repays overpaid tax automatically through later paydays.
Primary sources
- 1.Tax codes — gov.uk — How a tax code is built and what each letter means
- 2.What your tax code means — gov.uk — Letter-by-letter and prefix definitions
- 3.The Income Tax (Pay As You Earn) Regulations 2003 — legislation.gov.uk — Statutory basis for HMRC issuing and operating tax codes
- 4.Income Tax rates and Personal Allowances — gov.uk — 2026/27 bands the code applies against
- 5.If your tax code has a K at the start — gov.uk — How a K code adds untaxed income to taxable pay instead of subtracting an allowance
- 6.Personal Tax Account — gov.uk — HMRC service showing your current live tax code and letting you query it
Editorial process: how we source and review UK tax content.