What does my tax code mean?

How the number becomes an allowance

An employer or pension provider usually multiplies the number by ten to get the tax-free pay for the year, so 1257L means £12,570. HMRC works the number out by starting with the personal allowance and taking off income that has not been taxed and other deductions, such as company benefits, then swapping the last digit for a letter. A £2,000 benefit leaves £10,570, which is code 1057L. Each job or pension has its own code.

BR and 0T give the same tax here because all of this salary sits inside the basic rate band; they part once pay passes £37,700. National Insurance is £1,794 in every row, because a tax code only changes income tax. The full ledger for the first row is on the £35,000 salary page.

What the letters mean

L

The standard personal allowance.

M and N

Marriage Allowance. M means a partner has transferred £1,260 of their allowance to you, which on the standard allowance gives 1383M. N means you have transferred that amount, giving 1131N.

T

The code includes other calculations to work out the allowance.

BR, D0 and D1

All the pay from this job or pension is taxed at one rate with no allowance: the basic rate (20%), the higher rate (40%) or the additional rate (45%). They are usually used for a second job or pension.

0T

The allowance has been used up, or a new employer does not have the details needed to give a code. Pay is taxed through the bands from the first pound.

NT

No tax is taken from this income.

K codes

A K at the start means income or deductions that are not being taxed elsewhere come to more than the personal allowance. gov.uk gives four examples: tax owed from an earlier year, the State Pension or taxable state benefits, a taxable company benefit such as a car, and savings interest above the Personal Savings Allowance. The tax on that other income is collected through the job or pension that carries the code, and an employer cannot take more than half of pre-tax pay under a K code.

The calculator on this site treats ten times the K number as an amount added to taxable pay. In the table, K100 adds £1,000, so tax is charged on £36,000.

Emergency codes: W1, M1 and X

A code that ends in W1, M1 or X is an emergency code; some payroll software prints NONCUM. W1 is used for weekly pay, M1 for monthly pay and X when pay dates vary. Tax is usually worked out on total income so far in the tax year. On an emergency code it is worked out on that week or month alone, as if the same amount were paid in every period, which can give the wrong amount of tax.

The reasons gov.uk lists are a new job where the employer does not have your earlier income and tax details, and starting to get company benefits or the State Pension. The calculator ignores the ending and assumes a steady salary for a full year, so its annual figure is the same with or without it.

The S and C prefixes

An S in front of the code means the pay is taxed using the rates in Scotland, and a C means the rates in Wales. A Scottish taxpayer on the standard allowance has S1257L. The single-rate codes have Scottish versions with different meanings: SBR is the Scottish basic rate (20%), SD0 the intermediate rate (21%), SD1 the higher rate (42%), SD2 the advanced rate (45%) and SD3 the top rate (48%). The Welsh versions (CBR, CD0, CD1) follow the same pattern as BR, D0 and D1.