A K tax code is the one that works in reverse. Where a normal code gives you tax-free pay, a K code means your deductions are bigger than your Personal Allowance, so instead of a tax-free slice, the K figure is added to your taxable income. It is sometimes called a negative allowance or negative tax code.
This is part of our UK tax codes explained series.
What does a K tax code mean?
With a normal code like 1257L, the number is your tax-free allowance. With a K code, the situation is flipped: HMRC has deductions to make (untaxed income or benefits) that come to more than your £12,570 allowance. The leftover, the amount the allowance cannot absorb, becomes the K number.
The K comes first (K475, K1000, and so on), and the figure still follows the times-ten rule, but as an addition: a K475 code adds roughly £4,750 to your taxable pay over the year. To protect you, the tax taken under a K code is capped at 50% of that pay in each period, so it can never swallow more than half your pay packet.
Why do I have a K tax code?
K codes usually mean one or more of the following has outgrown your allowance:
- Taxable benefits in kind, a company car, fuel, or medical insurance can be large enough to wipe out your allowance.
- Untaxed income being collected through PAYE, such as a State Pension (which is taxable but paid without tax taken off) or rental income.
- Tax owed from an earlier year being recovered through your code.
The State Pension is a very common cause, because it is taxable but paid gross, HMRC reduces your allowance against your other income to collect the tax, and if the pension exceeds the allowance a K code results.
What to do if the code is wrong
If you think your tax code is wrong, do not just wait, an incorrect code is corrected from the date HMRC updates it, and any over- or under-payment is squared up afterwards. Steps to take:
- Check your latest tax code notice (the "PAYE Coding Notice", form P2) in your HMRC personal tax account. It shows how the code was built up.
- Compare it to your real situation, one job or several, any benefits in kind, untaxed income, or earlier-year underpayments being collected.
- Add up the deductions on your coding notice, benefits, untaxed income, old underpayments. A K code is only right if those genuinely exceed your £12,570 allowance.
- Query stale benefits, if a company car or other benefit has ended, make sure it has been removed, otherwise your K number is too high.
- Tell HMRC if anything is out of date, online, via the HMRC app, or by phone. They will issue a revised code to your employer.
- Watch your next payslip to confirm the new code has been applied and any refund has come through.
Frequently asked questions
Is a K tax code bad?
Not in itself, it just means tax that cannot be collected by reducing your allowance is collected by adding to your taxable pay instead. It is bad only if the underlying figures are wrong or out of date, which is worth checking.
What does the number in a K code mean?
It is the amount by which your deductions exceed your allowance, divided by 10. K475 means about £4,750 is added to your taxable pay across the year.
Is there a limit to how much a K code can take?
Yes. The tax taken under a K code is capped at 50% of your pay in each pay period, so it can never take more than half your wages or pension at once.
Think your tax code is wrong? It is one of the most common payroll errors, and HMRC will not always spot it for you. Zmartly's Self Assessment and personal tax team can check your code against your circumstances and deal with HMRC on your behalf. Get in touch for a free review, or book a free Tax Health Check.
