UK Tax Codes Explained: What They Mean (2025/26)

Your tax code is the small string of numbers and letters on your payslip that decides how much Income Tax comes out of your pay. Get it wrong and you either overpay every month or face a surprise bill from HMRC.

This guide explains what the common UK tax codes mean for the 2025/26 tax year, including 1257L, BR, D0, D1, K, 0T, NT, M and N. It's written for contractors, company directors and anyone juggling more than one source of income, because that's where codes most often go wrong.

We'll show you how to read your code, how to spot a wrong one, and exactly how to get it fixed.

What is a tax code and how does it work?

A tax code is issued by HMRC and tells your employer or pension provider how much Income Tax to take from your pay or pension. HMRC works out the code; your employer just applies it.

The code reflects your tax-free Personal Allowance (the amount you can earn before paying Income Tax), which is £12,570 for 2025/26. It's then adjusted up or down for things like Marriage Allowance, taxable benefits such as a company car, or tax you owe from an earlier year.

For 2025/26, once you've used your Personal Allowance, the rest of your income is taxed at the basic rate of 20% on the next £37,700, the higher rate of 40% from £50,271 to £125,140, and the additional rate of 45% above £125,140. These bands apply in England, Wales and Northern Ireland (Scotland sets its own, more on that below).

Tax codes matter most when you have more than one income stream. If you're a contractor with a part-time PAYE job, a director taking a salary alongside dividends, or a pensioner with two pensions, a wrong code can quietly cost you for months.

How do you read your tax code?

Person filling out legal paperwork at a desk

Most codes are a number followed by a letter. The number is your tax-free allowance with the last digit removed, and the letter describes your situation.

Take 1257L. The 1257 means an allowance of £12,570 (just add a zero). The L means you get the standard Personal Allowance. So 1257L is the standard code for someone with one job and no complications.

HMRC builds the number like this:

Start with the Personal Allowance: £12,570 for 2025/26.
Add anything that increases it, such as Marriage Allowance received or approved job expenses.
Subtract anything that reduces it, such as the taxable value of a company car or untaxed income.
Drop the last digit to get the code number, then add the letter.

You'll find your code on every payslip, on your annual P60, and on the tax code notice (a "P2") HMRC sends when your code changes. You can also see all your codes in your Personal Tax Account online.

What do the common tax codes mean?

Here's a quick reference to the codes you're most likely to see in 2025/26. Figures use the 2025/26 Personal Allowance of £12,570 and the rest-of-UK rates.

Code	What it means	Who it usually applies to
1257L	Full Personal Allowance of £12,570	Most people with one job or pension
BR	Basic rate (20%) on all of this income, no allowance	A second job or second pension
D0	Higher rate (40%) on all of this income, no allowance	A second income when your total is in the higher-rate band
D1	Additional rate (45%) on all of this income, no allowance	A second income when your total is above £125,140
0T	No allowance, normal 20/40/45% bands applied	New job with no P45 or details; allowance fully used
K	Adds untaxed income or owed tax to your taxable pay	Taxable benefits above your allowance, or tax owed
NT	No tax taken from this income	Limited cases, e.g. income below the allowance
M	Personal Allowance increased by 10% (Marriage Allowance received)	The higher-earning partner in a couple
N	Personal Allowance reduced by 10% (Marriage Allowance given away)	The lower-earning partner who transferred it
T	Other calculations involved that HMRC reviews individually	More complex situations

A code may also carry an S prefix (Scotland) or a C prefix (Wales), and an emergency code may show W1, M1 or X after it. We cover those below.

What does 1257L mean?

1257L is the standard code for 2025/26. It gives you the full Personal Allowance of £12,570, so you pay no Income Tax on the first £12,570, then 20% up to £50,270 and so on.

Illustrative example: salary of £30,000 on 1257L

Salary: £30,000
Tax-free Personal Allowance: £12,570
Taxable income: £17,430
Income Tax due: £17,430 × 20% = £3,486

If you earn over £100,000, your Personal Allowance is reduced by £1 for every £2 of income above £100,000, and it disappears entirely once your income reaches £125,140. At that point HMRC will usually move you onto a 0T code.

What do BR, D0 and D1 mean?

These codes apply when you have more than one source of PAYE income, so your Personal Allowance is already being used elsewhere.

BR (basic rate) taxes all of that income at 20% with no allowance. It's the normal code for a second job or second pension.

Illustrative example: a second job on BR

Main job: £30,000 on code 1257L (uses your full allowance)
Second job: £10,000 on code BR
Tax on the second job: £10,000 × 20% = £2,000

D0 (higher rate) taxes all of that income at 40%, used when your total income already sits in the higher-rate band. D1 (additional rate) taxes it at 45%, used when your total income is above £125,140.

A common and costly mistake is BR sitting on your only job. On a £30,000 salary, BR would take £6,000 in tax when 1257L should take £3,486, so you'd overpay £2,514 over the year. If you see BR on your only income, that code is wrong.

What does a K code mean?

A K code is the odd one out. Instead of giving you an allowance, it adds an amount to your taxable pay. It's used when you have untaxed income or owe tax that HMRC wants to collect through PAYE.

For example, K500 adds £5,000 to your taxable income for the year (500 with a zero added back on). That extra notional income is taxed alongside your actual pay, so more tax comes off each payday.

K codes commonly appear when:

A taxable benefit, such as a company car, is worth more than your remaining allowance.
HMRC is collecting tax you underpaid in an earlier year.
A state pension plus another pension together use up more than your allowance.

There's a built-in protection: a K code can't take more than 50% of your pay or pension in any pay period. If a K code looks wrong, for example it relates to a debt you've already cleared, check your P2 notice and contact HMRC.

What is an emergency tax code (0T, W1/M1)?

Emergency codes are used when your employer or HMRC doesn't yet have enough information to apply the right code, typically when you start a job without a P45.

0T gives you no Personal Allowance but applies the normal 20/40/45% bands. BR is sometimes used as an emergency code too, taxing everything at 20%.

The bigger issue is often the W1 or M1 suffix (sometimes shown as X). This means your code is "non-cumulative": tax is worked out on each pay period in isolation, ignoring what you've earned and paid so far this year. A normal "cumulative" code looks back across the whole tax year and smooths things out.

The practical effect: on a cumulative code, once your code is corrected, any overpaid tax is usually refunded automatically through payroll. On a W1/M1 code, that automatic in-year refund doesn't happen, so you may have to wait for HMRC's year-end reconciliation (the P800) to get it back.

To clear an emergency code, give your new employer your P45, or complete the starter checklist they provide, or update your details in your Personal Tax Account. Any of these prompts HMRC to issue the correct cumulative code.

What do NT, M, N and T mean?

NT means no tax is deducted from that income. It's used in limited situations, such as certain income that isn't taxable here.

M and N are about Marriage Allowance. If you're married or in a civil partnership and one of you earns below the Personal Allowance, the lower earner can transfer 10% of their allowance (£1,260 for 2025/26) to the higher earner, as long as the higher earner is a basic-rate taxpayer.

The partner who receives the allowance gets an M code and their allowance rises by £1,260.
The partner who gives it away gets an N code and their allowance falls by £1,260.

The receiving partner saves up to £1,260 × 20% = £252 for the year. You can apply for Marriage Allowance on gov.uk.

T simply means HMRC has included other calculations in your allowance and reviews the code individually. It's common where benefits or multiple income sources are involved.

What about Scottish and Welsh codes?

If you live in Scotland, your code carries an S prefix (for example S1257L). Scotland sets its own Income Tax rates and bands, which differ from the rest of the UK, so the rates in this guide don't apply to Scottish taxpayers. Check the current Scottish bands on gov.uk before relying on a figure.

If you live in Wales, your code carries a C prefix (for example C1257L). The Welsh Parliament can vary Income Tax rates, which is why the prefix exists, but the Welsh rates currently match those in England and Northern Ireland.

HMRC decides whether you're a Scottish or Welsh taxpayer based on where your main home is. If you've moved across the border and your code hasn't picked up (or dropped) the prefix, that's worth checking.

How do tax codes and National Insurance interact?

Income Tax and National Insurance are worked out separately on your payslip. Your tax code only affects the Income Tax line. National Insurance uses its own fixed thresholds and isn't changed by your tax code.

For employees (Class 1 National Insurance) in 2025/26, you pay 8% on earnings between the Primary Threshold of £12,570 a year and the Upper Earnings Limit of £50,270, then 2% on earnings above that.

Employers pay their own (secondary) National Insurance at 15% on your earnings above the Secondary Threshold of £5,000 a year. That's the employer's cost and doesn't come out of your take-home pay.

So if a wrong tax code makes your Income Tax too high or too low, your National Insurance generally stays correct regardless.

How do you check if your tax code is wrong?

The quickest check is HMRC's own online service. Sign in to Check your Income Tax for the current year to see every code HMRC holds for you, how each was worked out, and the tax it expects you to pay.

Look out for these red flags:

BR or 0T on your only job when it should be 1257L. You're likely overpaying.
1257L on a second job when it should be BR or D0. You're likely underpaying and heading for a year-end bill.
A K code for a debt you've already cleared.
No S or C prefix when you live in Scotland or Wales.
A W1, M1 or X suffix still showing months after you started a job.

If you'd rather not work through it yourself, this is exactly the kind of thing we check for contractors and directors as part of our self-assessment service. You can also sanity-check the numbers with our income tax calculator or take-home pay calculator.

What should you do if your code is wrong?

Update your details online. In your Personal Tax Account, correct your employment, income or benefit details. HMRC usually issues a revised code within a few working days and tells your employer automatically.
Give your employer your P45 or starter checklist. This is the fastest fix for an emergency code on a new job and switches you back to a cumulative basis.
Call HMRC on 0300 200 3300 (Monday to Friday) if it's urgent or the online route doesn't fit your situation. Have your National Insurance number and the PAYE reference from your payslip ready.
Check the next payslip to confirm the new code has been applied.

If you've overpaid, a corrected cumulative code usually refunds the overpayment through your next few payslips. If the tax year has already ended, HMRC sends a P800 calculation and refunds you. If you've underpaid, HMRC will either collect it through next year's code or include it in your Self Assessment.

Need a second pair of eyes on your tax code? If you're a contractor, director or anyone with more than one income stream, we'll review every PAYE code you hold, flag anything wrong, and deal with HMRC on your behalf. Talk to a Zmartly accountant and stop guessing about your payslip.

FAQs

What does the 1257L tax code mean for 2025/26?

1257L is the standard tax code for 2025/26. It gives you the full Personal Allowance of £12,570, so you pay no Income Tax on the first £12,570 you earn. After that you pay 20% up to £50,270, 40% up to £125,140, and 45% above that. It applies to most people with a single job or pension and no other untaxed income.

What does the BR tax code mean?

BR stands for basic rate. It means all the income from that source is taxed at 20% with no Personal Allowance, because your allowance is being used by another job or pension. BR is normal on a second job. But if BR is on your only job it's wrong, and on a £30,000 salary you'd overpay £2,514 over the year compared with the correct 1257L code.

What does a K tax code mean?

A K code adds an amount to your taxable pay rather than giving you an allowance. HMRC uses it to collect tax on things like a company car worth more than your allowance, or tax you owe from a previous year. For example, K500 adds £5,000 to your taxable income. A K code can't take more than half of your pay in any pay period.

Why am I on an emergency tax code?

Emergency codes such as 0T, or any code with a W1, M1 or X suffix, are used when your employer or HMRC doesn't yet have the full picture, usually because you started a job without a P45. Give your employer your P45 or complete their starter checklist, and HMRC will issue the correct code, normally refunding any overpaid tax through payroll once the code is on a cumulative basis.

Does a wrong tax code affect my National Insurance?

No. Income Tax and National Insurance are calculated separately. Your tax code only affects the Income Tax taken from your pay. National Insurance uses its own fixed thresholds, so it stays correct even if your tax code is wrong.

How do I check my tax code is right?

Sign in to HMRC's "Check your Income Tax for the current year" service to see all your codes and how they were worked out. Compare each code with this guide: 1257L on your main job, BR or D0 on a second one, and an S or C prefix if you live in Scotland or Wales. If something doesn't fit, update your details online or call HMRC on 0300 200 3300.

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