Understanding your tax code is crucial for ensuring you pay the correct amount of tax in the UK. Each tax code is a combination of numbers and letters that tell your employer or pension provider how much tax-free income you are entitled to. Here's everything you need to know about tax codes, including how to decode yours, why they may change, and what to do if it's incorrect.

What Your Tax Code Means

Your tax code is made up of numbers and letters. For example, the tax code 1257L is currently used for most people who have one job or pension. The numbers represent how much of your income is tax-free, while the letters indicate any special circumstances affecting your tax-free Personal Allowance.

Check What Your Tax Code Means

You can use a tax code checker to understand:

• What the numbers and letters in your tax code represent
• How much tax you will pay
• What actions you may need to take next

Depending on your circumstances, you may be asked for:

• Your annual income before any deductions
• Company benefits you receive or have received
• Your State Pension amount

What the Numbers Mean

The numbers in your tax code tell your employer or pension provider how much tax-free income you get in a given tax year. HMRC calculates this based on your tax-free Personal Allowance and any untaxed income (such as interest or part-time earnings), as well as the value of any company benefits like a company car.

Example:

If you’re entitled to the standard Personal Allowance of £12,570 but receive a company benefit like medical insurance worth £1,570, this would reduce your Personal Allowance to £11,000. As a result, your tax code would be 1100L.

What the Letters Mean

The letters in your tax code explain your situation and how it impacts your Personal Allowance. Here's what the letters typically signify:

Letters	What They Mean
L	Entitled to the standard tax-free Personal Allowance
M	Receiving 10% of your partner’s Personal Allowance (Marriage Allowance)
N	Transferred 10% of your Personal Allowance to your partner (Marriage Allowance)
T	Your tax code includes other calculations to work out your Personal Allowance
0T	Your Personal Allowance has been used up, or you’ve started a new job and your employer lacks the details to assign a tax code
BR	All income is taxed at the basic rate (usually if you have more than one job)
D0	All income is taxed at the higher rate (for those with more than one job)
NT	Your income is taxed using the Scottish rates
C	Your income is taxed using the Welsh rates

For a full list of letter meanings, visit the HMRC page.

Emergency Tax Codes

If your tax code ends in W1, M1, or X, it’s an emergency tax code. This happens when HMRC doesn’t get your income details in time, often after a change like starting a new job or receiving a pension. Emergency tax codes are temporary, and HMRC will update them once they have the correct information.

If Your Tax Code Has ‘K’ at the Beginning

Tax codes starting with K mean you have income that’s not being taxed elsewhere, and its value exceeds your tax-free allowance. This might happen if you owe tax from a previous year or receive certain benefits.

Why Your Tax Code Might Change

Your tax code can change for several reasons, such as:

• Starting a new job or pension
• Changes to your State Pension
• Receiving company benefits
• Claiming Marriage Allowance
• Claiming tax relief on work expenses

You can check the reasons for a tax code change using the Check your Income Tax service.

Updating Your Tax Code

If you think your tax code is incorrect, you can update it by contacting HMRC directly or through the online tax account service. Your employer can also help by providing HMRC with details of your previous income or benefits.

For more information on tax codes, visit the UK Government's official page.