What tax code should I be on?
Your tax code is based on your income and things like tax-relief expenses, taxable benefits, and anything else that may affect how much taxes you pay in a year.
In this article, we’ll explain what is a tax code, how it’s calculated, and what you can do if you believe your tax code is wrong.
Read on.
Tax Codes Explained: What Is a Tax Code?
A tax code is a sequence of numbers and letters provided by the HMRC that tells your employer or pension provider how much Income Tax and National Insurance to take from your pay or pension (here’s what happens if you don’t pay National Insurance).
All employees in the UK that are paid through the PAY and recipients of private pensions have a tax code.
Self-employed individuals don’t have a tax code, but they still have to pay taxes through the self-assessment system.
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Understanding Your Tax Code: What Tax Code Should I Have?
The tax code that you’ll receive from the HMRC depends on your income and circ*mstances.
The numbers in your tax code show how much tax-free income you can earn in a year (also known as Personal Allowance) before you start paying taxes on it. The letters refer to your situation and how that affects your Personal Allowance.
For example, the tax code 1250L means that you’re entitled to £12,500 of Personal Allowance. This was the standard UK tax code for the 2019/2020 year.
The standard tax code for 2021/22 and 2022/23 is 1257L because the UK government increased the standard Personal Allowance to £12,570.
If you see a tax code that isn’t in line with the standard Personal Allowance, like a 1256L tax code, that means you were given some tax relief.
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UK Tax Codes and Their Meaning
Here’s a list of some tax code letters and what they mean.
| Letter | What they mean |
| K (at the beginning) | You have income that’s worth more than your Personal Allowance. |
| L | Standard Personal Allowance. |
| M | You’ve received a 10% transfer from your partner’s Personal Allowance. |
| N | You’ve transferred 10% of your Personal Allowance to your spouse. |
| BR | All your income from your current job or pension is taxed at a basic rate. |
| T | Your Personal Allowance includes additional calculations. |
| 0T | You’ve spent all of your Personal Allowance, or your new employer doesn’t have enough information to give you a tax code. |
| D0 | You’re taxed at a higher rate (usually if you have more than one job or pension). |
| D1 | All of your income is taxed at an additional rate. |
| NT | You aren’t required to pay any tax on this income. |
| W1, M, X (emergency codes) | You will pay tax on income that’s above the basic Personal Allowance. |
How To Check Your Tax Code?
You can see your tax code on your payslip or your PAYE (P2) coding notice, which you should receive at the beginning of the tax year (it contains your tax code and explains how it was calculated)
Additionally, you can find your tax code either on your P45 and P60 or on your pension advice slip (for those that receive a private pension).
Finally, you can use the online checker on the government website and find your tax code for the current year, the previous year, and the next year.
What If You Have The Wrong Tax Code?
The HMRC might give you the wrong tax code if they have incorrect information about your income.
If you think your tax code is wrong, you can update your employment details via the check your Income Tax online service or contact the HMRC by phone.
You also might see different tax codes if the HMRC has automatically updated it due to a change in your income (for ex., You start getting a pension, have a new job, or begin receiving benefits).
If your tax code was updated and you’ve paid too little or too much, HMRC will send you a Simple Assessment tax calculation or P800, which will allow you to pay what you owe or get a refund.
Bottom Line
All employees and pension recipients in the UK get a tax code that tells them how much they have in Personal Allowance before they can start paying taxes on the income they receive.
The standard (and most common) tax code for the current tax year is 1257L, which means that the employee has £12,570 in tax-free income for the year. Those that have a second job or are entitled to benefits will see a different tax code on their payslips.
Frequently Asked Questions And Their Answers
How do I know if I’m on the right tax code?
To understand your tax code, you can log into the Income Tax online service, where you can see how it was calculated.
What is the most common UK tax code?
1257L is the most common tax code in the UK. It’s given to people who have one job or those who receive one pension and are not entitled to any benefits or additional tax relief.
Why is my tax code so low?
Your tax code could be affected by factors such as untaxed income (rent, savings), previously underpaid tax, employment-related benefits, or health insurance.
What tax code should I be on?
Your tax code depends on your income and your situation. If you have one job or receive one pension and don’t have any benefits or entitlement to tax relief, your tax code should be 1257L.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.
