What is a tax code?

Your tax code tells you and your employer/pension provider how much tax-free pay you’re entitled to. 

Assuming you have only one source of income, it’s from employment and there’s nothing unusual about your circumstances or history, you’ll probably have a tax code of 1257L from April 2024.

A Scottish taxpayer will have their tax code prefixed with an 'S' or ‘C’ if they are a Welsh taxpayer, so their tax code could be S1257L or C1257L for example.  

The L indicates that you are entitled to the full personal allowance, but there are a variety of different letters you might see. 

The personal allowance from 6th April 2024 to 5th April 2025 will be £12,570 but the last digit is dropped when constructing the tax code. 

Your tax code may differ to 1257 where you claim expenses against your employment income. These expenses must be wholly and exclusively for your employment and you receive no alternative or reimbursement from your employer. 

If your tax code is followed by W1 or M1, this indicates that you are on an emergency tax code which may be as a result of starting a new job. They mean you are not being taxed cumulatively. 

If you have more than one job, you may find that your personal allowance is split across the two jobs or you may have 1257L on one job and BR on the other. HM Revenue and Customs (HMRC) will apply a BR code, when it believes you are a basic rate taxpayer and that your personal allowance is being used in-full against another source of income you have. Any income with a BR code will be taxed at 20%. 

Other tax codes you may see include: 

• DO – where all your income from this source is taxed at the higher rate, for example you have income elsewhere that has used your personal allowance and your basic rate band. 
• D1 – where all your income from this source is taxed at the additional rate. 
• NT – where you pay no tax on this income. 

Not sure where to find your tax code? You are able to see your tax code if you download and sign in to the HMRC app, you can also see it through your personal tax account. Furthermore, your payslip may include your tax code and your P60 will show the tax code you were on at the end of the last tax year. 

Your tax code is important because it will affect how much tax you pay. When HMRC issues you with a tax code, you should make sure you check the calculations. If you think your tax code is wrong, you can contact HMRC to get it changed. 

If you have any queries about your tax code or need us to check it, please call 01245 245420.

Date published 6 Apr 2020 | Last updated 25 Oct 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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