UK Tax Codes Explained Letter by Letter

UK tax codes are an HMRC instruction to employers specifying how much of an employee's pay is tax-free (the allowance) and which rates apply. The code combines numbers (the allowance divided by 10) and letters (the category, indicating type of allowance and rate structure).

This guide decodes each main category, the prefixes for Scottish and Welsh taxpayer status, and the emergency code variants (W1 and M1) that apply when full information is not yet available.

Numbers and the L suffix

The numerical part of a tax code represents the Personal Allowance the employer should apply, divided by 10. The standard code for 2026/27 is 1257L: 1257 = GBP 12,570 of allowance, L = standard letter for most employees.

Where the allowance differs from the standard (additional reliefs or deductions), the number changes. A taxpayer with GBP 13,570 of allowance has code 1357L; with GBP 11,570 has code 1157L. The letter L stays the same because the underlying status is unchanged.

The L letter indicates the basic Personal Allowance. Most UK employees have a tax code in the format [number]L throughout their career, with the number varying as allowances and benefits change.

Worked example: an employee with no special status, no benefits in kind, no Marriage Allowance, has the standard 1257L code. An employee with a GBP 5,000 company car benefit has the allowance reduced by GBP 5,000 to GBP 7,570, giving code 757L.

M, N, and Marriage Allowance

Code suffix M: the employee receives the Marriage Allowance transfer from their spouse or civil partner. The code includes an additional GBP 1,260 of allowance (1257L becomes 1383M, since 1383 = GBP 13,830 / 10). The transfer saves up to GBP 252 of tax a year.

Code suffix N: the employee has transferred GBP 1,260 of their allowance to their spouse or civil partner under Marriage Allowance. The code reduces the allowance by GBP 1,260 (1257L becomes 1131N). The transferring partner pays slightly more tax in exchange for the GBP 252 saving for the household.

Marriage Allowance eligibility: married or civil partnership, transferring partner with income below the Personal Allowance, receiving partner is a basic-rate taxpayer (not higher or additional rate). Both partners born after 5 April 1935. Application through Personal Tax Account; backdating up to 4 prior tax years available.

Practical action: where both spouses' codes are 1257L when one earns below the PA and the other is basic-rate, Marriage Allowance is being missed. Applying via the PTA captures the GBP 252/year ongoing plus up to GBP 1,008 of backdated refunds.

BR, D0, D1, NT, 0T - rate-only codes

Code BR: basic rate applies to all income from this source, no allowance. Typically used for second jobs where the Personal Allowance is allocated to the main job. The employee pays 20% on all earnings from this source.

Code D0: higher rate (40%) on all income from this source. Used for second or third income sources where the higher rate would apply after stacking with main income. The employer applies 40% to every pound of pay.

Code D1: additional rate (45%) on all income from this source. Used for very high earners with substantial second income. Rare in practice but applies similarly to D0 with the higher rate.

Code 0T: no Personal Allowance applied. Full band rates apply from the first pound. Used in some emergency or specific scenarios. NT (no tax) is the opposite - no tax on this income source, typically applied to specific cases like seafarers or where double tax relief is being given.

K codes and negative allowance

K codes are used where the deductions from the allowance exceed the allowance itself. Common reason: high benefits in kind (company car worth more than the Personal Allowance) or large prior-year underpayments being coded out through the current year's PAYE.

The number after K represents the negative adjustment divided by 10. Code K500 means the employer applies a tax instruction to ADD GBP 5,000 of notional income to the actual pay for tax calculation purposes (rather than deducting allowance). The effect is to ensure tax is paid on income that exceeds the allowance available.

K codes are limited so they cannot cause tax to exceed 50% of pay in any pay period. Where the adjustment would exceed this cap, the excess is carried forward to subsequent pay periods.

Worked example: an employee has a GBP 18,000 company car benefit but only GBP 12,570 of standard PA. The benefit exceeds the allowance by GBP 5,430. The code becomes K543 (the negative GBP 5,430 / 10). PAYE adds notional GBP 543 of monthly taxable income to the employee's actual pay, ensuring tax is collected on the excess benefit.

Prefixes: S for Scotland, C for Wales

The S prefix on a tax code indicates a Scottish taxpayer. The Scottish income tax rates apply: starter (19%), basic (20%), intermediate (21%), higher (42%), advanced (45%), top (48%). HMRC determines Scottish taxpayer status based on where the employee's main home is for most of the tax year.

The C prefix on a tax code indicates a Welsh taxpayer. Welsh Rates of Income Tax currently match England and Northern Ireland exactly, but the C prefix identifies the taxpayer as Welsh for record-keeping. The Welsh Government can vary the rates in future Budgets.

No prefix indicates England and Northern Ireland residency, which use the UK standard rates set by the UK Government.

Practical action: address changes between regions (Scotland to England, England to Wales) need to be reported to HMRC promptly. The wrong prefix produces incorrect tax through PAYE; HMRC's year-end reconciliation corrects but with a balancing adjustment. Updating address through the Personal Tax Account ensures the correct prefix is applied promptly.

Checking and querying your tax code

The Personal Tax Account at gov.uk/personal-tax-account shows the current tax code with a breakdown of how it was built (Personal Allowance, less benefits, less prior underpayments). The breakdown identifies any item that may be wrong - a benefit in kind no longer relevant, an underpayment that has been paid, a Marriage Allowance not yet applied.

Querying through the PTA: most issues can be raised directly through the tax code section of the PTA with a request to review or update. HMRC responds typically within 2-4 weeks with a corrected coding notice if appropriate. The HMRC income tax helpline (0300 200 3300) handles cases the PTA cannot resolve.

Common reasons to query: tax higher than expected (the code may have an unexpected deduction), recent salary change not reflected, prior-year refund expected but not received, address change not yet showing as S or C prefix.

Practical action: a quarterly check of the tax code through PTA catches issues before they become large. The check takes 2 minutes through the app and confirms the position. Most employees find no issues most quarters; the small discipline catches the occasional error early.

Updating your tax code and address changes

Tax codes are updated by HMRC based on information they receive: from employers (RTI submissions, P11Ds), from the taxpayer (PTA updates, Self-Assessment returns), from other sources (banks reporting savings interest, brokers reporting dividends).

Address changes are particularly important. Moving between regions (Scotland to England, England to Wales) changes the tax code prefix (S, C, or none). HMRC needs the address update to apply the correct prefix; updates through the Personal Tax Account are processed immediately.

Marriage allowance applications, benefit-in-kind changes, removal of items from the tax code, and other updates can all be made through the PTA. The system processes most updates within a few days; the next coding notice reflects the change and the next pay run applies it.

Worked example: a Welsh resident moves to Scotland for a new job. They update the address through the PTA. HMRC issues a new tax code with S prefix (S1257L instead of C1257L). The new code applies from the next pay run; year-to-date Scottish income tax rates are recalculated by the employer's payroll software.

Frequently asked questions

What does 1257L mean?

Standard UK tax code: 1257 = GBP 12,570 of Personal Allowance, L = standard letter for most employees. The employer applies the GBP 12,570 allowance against the year's pay, with the band rates (20% basic, 40% higher, 45% additional) applying to income above. This is the default code for an employee with no special status, no benefits in kind, and no Marriage Allowance.

Why does my tax code start with S?

You're a Scottish taxpayer based on HMRC's records of your address. The Scottish income tax rates apply: starter (19%), basic (20%), intermediate (21%), higher (42%), advanced (45%), top (48%). The S prefix triggers the Scottish rates on non-savings non-dividend income. If you've moved between Scotland and England, update your address through the Personal Tax Account to ensure the correct prefix.

What's a K code?

Negative-allowance code used where deductions exceed the Personal Allowance. The number represents the negative amount divided by 10 (K500 = GBP 5,000 of additional notional income added for tax calculation). Common reasons: high company car or other benefit in kind exceeding allowance, large prior-year underpayment being coded out. The 50% cap prevents K codes from taking too much tax in any single pay period.

Why do I have a BR or D0 code on my second job?

Because the Personal Allowance has been allocated to your main job. The second job (or third) uses a code without allowance: BR (basic rate 20% from first pound), D0 (higher rate 40%), D1 (additional rate 45%). HMRC's default is BR for a second job. Where the second job is small and the main job has unused allowance, HMRC can split the allowance between codes on request through the PTA.

What's the difference between 1257L M1 and 1257L?

M1 (or W1) is the emergency code suffix indicating Month One (or Week One) basis - the allowance is applied to each pay period independently, not cumulatively. The standard 1257L without M1/W1 applies cumulatively, with year-to-date allowance and band capacity reconciled each pay period. Emergency codes typically over-tax in early months; HMRC issues the cumulative code from the first RTI submission to correct.