If you’ve ever looked at your payslip and wondered what the string of numbers and letters in your tax code means—you’re not alone. Understanding your HMRC tax code is crucial to ensure you’re paying the right amount of tax and not losing out on earnings.
Many UK employees, freelancers, and business owners don’t realise that an incorrect tax code can lead to overpayments or unexpected tax bills. In this guide, we’ll break it down in simple terms—so you know what your tax code means, where to find it, and how to fix mistakes if needed.
What is a Tax Code?
HMRC (HM Revenue & Customs) generates a tax code that tells your employer or pension provider how much Income Tax to deduct from your salary or pension. It’s a mix of numbers and letters, each serving a specific purpose. Getting this wrong could mean paying too much or too little tax—so it’s worth precisely understanding exactly what’s on your payslip.
Where Can You Find Your UK HMRC Tax Code?
You can check your tax code in the following places:
✅ Your payslip (Usually next to your salary details)
✅ Your P60 or P45 form (For year-end tax summaries)
✅ HMRC online account (Check here: Visit HMRC)
✅ Letters from HMRC (Sent if your tax code changes)
Do Self-Employed People Get a Tax Code?
No! Self-employed individuals don’t receive tax codes since they don’t have PAYE (Pay As You Earn) deductions. Instead, they file a Self-Assessment tax return to calculate and pay tax on their earnings.
How Are Tax Codes Structured?
A tax code is typically a combination of numbers and letters, like 1257L, BR, or K475. Numbers (e.g., 1257) – Represent how much tax-free Personal Allowance you can earn before paying tax. Letters (e.g., L, BR, K, M, N) – Indicate special tax conditions (e.g., married allowance, emergency tax, etc.).
Understanding Tax Code Letters (With Examples)
Standard Tax Codes
| Tax Code | What They Mean |
|---|---|
| L | You’re entitled to the standard tax-free Personal Allowance |
| M | Marriage Allowance: You’ve received a transfer of 10% of your partner’s Personal Allowance |
| N | Marriage Allowance: You’ve transferred 10% of your Personal Allowance to your partner |
| T | Your tax code includes other calculations to work out your Personal Allowance |
| OT | Your Personal Allowance has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code |
| BR | All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension) |
| DO | All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension) |
| D1 | All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension) |
| NT | You’re not paying any tax on this income |
| S | Your income or pension is taxed using the rates in Scotland |
| S0T | Your Personal Allowance (Scotland) has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code |
| SBR | All your income from this job or pension is taxed at the basic rate in Scotland (usually used if you’ve got more than one job or pension) |
| SD0 | All your income from this job or pension is taxed at the intermediate rate in Scotland (usually used if you’ve got more than one job or pension) |
| SD1 | All your income from this job or pension is taxed at the higher rate in Scotland (usually used if you’ve got more than one job or pension) |
| SD2 | All your income from this job or pension is taxed at the advanced rate in Scotland (usually used if you’ve got more than one job or pension) |
| SD3 | All your income from this job or pension is taxed at the top rate in Scotland (usually used if you’ve got more than one job or pension) |
| C | Your income or pension is taxed using the rates in Wales |
| C0T | Your Personal Allowance (Wales) has been used up, or you’ve started a new job and your employer does not have the details they need to give you a tax code |
| CBR | All your income from this job or pension is taxed at the basic rate in Wales (usually used if you’ve got more than one job or pension) |
| CD0 | All your income from this job or pension is taxed at the higher rate in Wales (usually used if you’ve got more than one job or pension) |
| CD1 | All your income from this job or pension is taxed at the additional rate in Wales (usually used if you’ve got more than one job or pension) |
Special Tax Codes That Might Mean You’re Paying More Tax
| Tax Code | What It Means |
|---|---|
| K125 | You owe tax from previous years or are taxed on benefits |
| OT | You have no Personal Allowance (usually for new employees) |
| NT | No tax is paid on your income (rare) |
Emergency Tax Codes (W1, M1, X)
If you see W1, M1, or X in your tax code, you might be on emergency tax. This usually happens when:
• You start a new job without a P45.
• You haven’t updated HMRC about a job change.
• Your employer hasn’t received tax details yet.
Fix this by contacting HMRC ASAP! Otherwise, you might overpay tax unnecessarily.
What to Do If You Overpaid Tax?
If you overpaid tax due to an incorrect tax code, you can claim a refund from HMRC.
How to Claim a Tax Refund:
Dealing with tax codes can be frustrating, but ensuring yours is correct can save you money and stress. If you’re unsure, Accountant People can help you review your tax code and ensure you’re paying the right amount.
📞 0333 023 1300
Final Thoughts
Understanding your tax code doesn’t have to be complicated. The key takeaway is:
✅ Check your tax code regularly
✅ Contact HMRC if it looks wrong
✅ Fix issues early to avoid overpaying
A small check now could mean big savings in the future!