A tax code is a number and letter combination used by employers and pension providers to work out how much Income Tax to deduct through PAYE. It helps payroll decide how much tax-free pay to apply before tax is taken.
How a tax code works
Payroll uses your tax code when calculating PAYE Income Tax. The number in the code normally points to how much tax-free income can be used in that tax year.
For example, the tax code 1257L usually means the employee has a standard tax-free allowance of £12,570. The number 1257 is multiplied by 10 to estimate the tax-free amount.
tax code number × 10 ≈ tax-free income
1257 × 10 = £12,570
Common UK tax codes
Tax codes vary depending on your personal tax position. These are common examples you may see on a UK payslip.
Often used where the standard Personal Allowance applies.
Usually means all income from that job or pension is taxed at basic rate.
Can mean tax is being calculated on a non-cumulative basis.
| Code or marker | Simple meaning | Common situation |
|---|---|---|
| 1257L | Standard Personal Allowance is usually being applied. | Often one job or pension with no special adjustment. |
| BR | All income from that source is taxed at basic rate. | Often a second job or pension. |
| D0 | All income from that source is taxed at higher rate. | Can appear for additional employment or pension income. |
| K code | Taxable additions exceed allowances. | Benefits, underpaid tax or other adjustments may be included. |
| W1, M1 or X | Emergency or non-cumulative tax basis. | Often new job, missing P45 or changing payroll information. |
What does 1257L mean?
1257L is the tax code commonly used for people with one job or pension and the standard Personal Allowance. The number 1257 broadly represents £12,570 of tax-free income in the tax year.
The letter L usually means the person is entitled to the standard tax-free Personal Allowance. If the code is followed by W1, M1, X or NONCUM, it may be an emergency or non-cumulative code.
If your tax code is 1257L, payroll may treat £12,570 of annual income as tax-free before PAYE tax is calculated, depending on your pay pattern and circumstances.
Why a tax code can change
HMRC can update a tax code when information changes. A tax code change can affect your net pay even if your salary has not changed.
- You start a new job and payroll does not yet have a P45.
- You have more than one job or pension.
- You receive a taxable benefit, such as a company car or medical cover.
- You have underpaid or overpaid tax from a previous period.
- Your estimated income changes.
- HMRC receives updated employer or pension provider information.
What if your tax code is wrong?
If your tax code is wrong, your PAYE tax deduction may be too high or too low. This can mean lower take-home pay now, or a tax bill later.
Start by checking your payslip, P45, HMRC app or personal tax account. If the information is wrong or missing, update HMRC or contact payroll for help.
Important: it is your responsibility to make sure the right amount of tax is being paid. If a tax code looks wrong, check it promptly.
Does a tax code affect National Insurance?
No. A tax code is used for PAYE Income Tax. National Insurance is calculated separately using NI thresholds, rates, pay period and NI category.
Tax code
Affects PAYE Income Tax by telling payroll how much tax-free pay to apply.
National Insurance
Calculated separately from earnings and NI category, not from the tax code.
Calculate take-home pay with a tax code
The take-home pay calculator lets you estimate salary after PAYE, National Insurance, pension and student loan deductions. Use the custom Personal Allowance option if your tax code gives a different allowance.
Estimate PAYE and take-home pay
Enter salary, tax region, pension and student loan details for an estimated result.
Tax code FAQs
What does a tax code do?
A tax code tells payroll how much tax-free pay to apply before PAYE Income Tax is deducted.
What does 1257L mean?
1257L usually means the standard Personal Allowance is being applied, so the number broadly represents £12,570 of tax-free income.
What does emergency tax code mean?
An emergency tax code can appear with W1, M1, X or NONCUM. It often happens when payroll does not have full tax information yet.
Can a tax code change my take-home pay?
Yes. A tax code change can increase or reduce PAYE tax, which changes your net pay.