What is a Tax Code?
Your tax code is a combination of numbers and letters that tells your employer or pension provider how much tax to deduct from your pay or pension. It's crucial to understand your tax code as it directly affects your take-home pay.
How to Read Your Tax Code
A typical tax code looks like this: 1257L. Let's break down what this means:
Example: 1257L
- 1257 - This number represents your tax-free Personal Allowance divided by 10. In this case, £12,570.
- L - This letter indicates you're entitled to the standard Personal Allowance.
Common Tax Code Letters and Their Meanings
| Letter | Meaning |
|---|---|
| L | You're entitled to the standard Personal Allowance |
| M | You've received 10% of your partner's Personal Allowance |
| N | You've transferred 10% of your Personal Allowance to your partner |
| T | Your tax code includes other calculations to work out your Personal Allowance |
| BR | All your income from this job or pension is taxed at the basic rate (20%) |
| D0 | All your income from this job or pension is taxed at the higher rate (40%) |
| D1 | All your income from this job or pension is taxed at the additional rate (45%) |
| NT | No tax is to be taken from this income |
Emergency Tax Codes
You might see these codes if HMRC doesn't have enough information about your income:
- 1257L W1 - Week 1 basis
- 1257L M1 - Month 1 basis
- 0T - No Personal Allowance
How Your Tax Code is Calculated
Your tax code is calculated based on several factors:
- Your Personal Allowance (£12,570 for 2025/26)
- Any benefits you receive from your employer
- Any income that hasn't been taxed
- Any tax reliefs you're entitled to
Common Tax Code Problems
Watch out for these issues:
- Wrong tax code leading to over or underpayment
- Multiple jobs with incorrect tax codes
- Benefits not properly accounted for
- Emergency tax codes not being updated
How to Check Your Tax Code
You can find your tax code:
- On your payslip
- In your P45 or P60
- Through your Personal Tax Account on GOV.UK
- On your tax code notice from HMRC
What to Do If Your Tax Code is Wrong
If you think your tax code is incorrect:
- Check your Personal Tax Account on GOV.UK
- Contact HMRC if you need to update your information
- Keep all relevant documents and payslips
- Use our Salary Calculator to verify your take-home pay
Tax Code Changes for 2025/26
Key changes for the 2025/26 tax year include:
- Personal Allowance remains at £12,570
- Basic rate threshold remains at £50,270
- Higher rate threshold remains at £125,140
- Additional rate threshold remains at £125,140
Calculate Your Take-Home Pay
Use our salary calculator to see how your tax code affects your take-home pay.
Try Our Salary Calculator