PAYE and Your Tax Code

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If you are an employee, you probably never think about your tax code — until your pay is wrong. The code is the short string of numbers and letters on your payslip, and it tells your employer how much of your pay is tax-free and which rates to use. Get it wrong and you can overpay tax for months, or underpay and get a bill later. This guide explains how PAYE works, how to read your code, and what to do if it looks wrong.

Your tax code in one sentence

The standard tax code for 2026/27 is 1257L: the number 1257 means £12,570 of tax-free pay (the number times 10), and L means you get the standard Personal Allowance. You can find your code on your payslip, your P45, your P60, or in your Personal Tax Account on GOV.UK.

How PAYE works

PAYE stands for Pay As You Earn. It is the system HMRC uses to collect Income Tax (and National Insurance) from employees and most pensioners. Your employer or pension provider works out the tax on each payday, deducts it before the money reaches your bank account, and sends it to HMRC. You do not file a return for PAYE income, and you do not pay the tax yourself.

PAYE usually works well when your pay is steady and you have one job, because it spreads the tax evenly across the year. It can go wrong when things change: a new job, a second job, a pay rise, a benefit such as a company car, or an underpayment from a previous year. Each of those can change your tax code, and the code is how HMRC tells your employer about the change.

How to read your code

A standard code has two parts: a number, then one or more letters. The number, multiplied by 10, is roughly how much you can earn in the year before paying tax. So 1257L means £12,570 tax-free — the full Personal Allowance. If your code is 1100L, you get £11,000 tax-free, perhaps because HMRC is collecting an underpayment or a benefit through your code.

The letters say how the allowance was worked out. L is the most common: it means you are entitled to the standard Personal Allowance. M means you have received some of your partner’s allowance under the Marriage Allowance; N means you have given some of yours away. T means your code includes other calculations HMRC has not broken down. S at the start means Scottish rates apply; C means Welsh rates.

Codes that tax everything

Some codes have no number at all, and they tax all of the income from that source. BR means basic rate: all the income from that job or pension is taxed at 20%. D0 means all of it is taxed at the higher rate of 40%, and D1 at the additional rate of 45%. These codes are common for second jobs and second pensions, because your Personal Allowance is already used up by your main job.

0T means no allowance at all: all the income is taxed at the basic, higher, and additional rates as it rises through the bands. K means a negative allowance — you have income that is not being taxed elsewhere, such as a benefit or an underpayment, and HMRC adds an amount to your taxable pay. If you see BR, D0, 0T, or K on your payslip, it is worth checking that it is right, because these codes are the ones most likely to over-collect.

Emergency codes

When you start a new job and your employer does not yet have your details from HMRC, you may be put on an emergency code — often 1257L with W1, M1, or X on the end, which means the code is applied on a non-cumulative basis (each payday is taxed on its own, rather than on your year-to-date pay). Emergency tax can over-collect, especially if you are paid a large amount in your first month.

HMRC usually sorts an emergency code out within about 35 days of getting your details, and any overpaid tax is normally refunded through your pay once the correct code is applied. If your emergency code lasts much longer than that, check your Personal Tax Account and make sure HMRC has your correct details — and that your previous employer sent your P45.

How to check and fix your code

Your code is on your payslip — usually near the top — and on your P45 when you leave a job, your P60 at the end of the tax year, and your PAYE coding notice (form P2), which HMRC sends before the tax year starts. The same code should appear in your Personal Tax Account on GOV.UK, which also shows how HMRC worked it out.

If the code looks wrong — if you have changed jobs, your benefits have changed, or you think an underpayment has been added by mistake — update your details in HMRC’s "Check your Income Tax" service, or phone the Income Tax helpline on 0300 200 3300. HMRC, not your employer, decides your code: your employer simply applies whatever code HMRC sends. Once HMRC issues a new code, it should show on your next or following payslip.

Sources: GOV.UK, Tax codes; GOV.UK, What your tax code means; GOV.UK, Personal Tax Account; GOV.UK, Emergency tax codes.

General information only. This page explains how PAYE and tax codes work in plain English. It is not tax advice, and it cannot tell you what you owe or what you should do about your own tax. Always confirm the current rates, rules, and your own position on GOV.UK or with HMRC before you act, and get professional advice for anything complicated. Contact: hello [at] tapetoolhq.com.