How to read a UK PAYE tax code — what the number and the letters mean

A PAYE tax code tells an employer how much tax-free pay to give an employee before deducting Income Tax. It is built from a **number and a letter**, and once you can read the two parts the code stops being mysterious. The official decoder is gov.uk's Tax codes guide; the visual above works the most common one — **1257L** — through field by field.

The **number** is the tax-free amount divided by ten. 1257 means **£12,570** of tax-free Personal Allowance for the year, spread evenly across pay periods. The **letter** describes the situation. **L** is the standard tax-free Personal Allowance. **M** and **N** are the Marriage Allowance codes: M means you have received 10% of a spouse's allowance (£1,260 for 2025/26), N means you have transferred 10% of yours away. The Personal Allowance has been frozen at £12,570 since 2021/22 and remains frozen to April 2028, so **1257L is the standard code for both 2025/26 and 2026/27**.

Several codes override the allowance entirely. **BR** taxes all income from that source at the **basic rate (20%)**; **D0** taxes it all at the **higher rate (40%)**; **D1** taxes it all at the **additional rate (45%)**. These usually appear on a second job or a pension, where the allowance is already used by the main income. A **K code** is the inverse: it means untaxed income or taxable benefits (a company car, unpaid tax from a previous year) exceed the allowance, so the excess is *added* to taxable pay rather than deducted — a K code increases the tax taken. **0T** means no allowance is available and each tax band is applied in turn.

Two further signals matter. A prefix **S** (Scotland) or **C** (Wales, *Cymru*) means the devolved Income Tax rates apply — Scottish bands in particular differ from the rest of the UK, so the same salary produces a different deduction. And **W1**, **M1**, or **X** mark an **emergency, non-cumulative code**: tax is worked out on that pay period alone, ignoring what has already been earned and taxed in the year. Emergency codes are common when starting a job without a P45 and are usually corrected once HMRC has full details. If a code looks wrong, the figures to check are the number (does it match your real allowance?) and the letter (does it match your situation?) against the gov.uk Tax codes reference.