Your tax code is a combination of numbers and letters used by your employer or pension provider to calculate the amount of Income Tax to deduct from your pay. An incorrect tax code can lead to overpaying tax or facing an unexpected bill.
Common UK Tax Codes Explained
Here are the most common letters used in UK tax codes and what they mean:
- L: You qualify for the standard tax-free Personal Allowance (£12,570).
- BR: All income from this job is taxed at the Basic Rate of 20% with no tax-free allowance.
- K: You have income that is not being taxed in another way (often because of company benefits or underpaid tax) which exceeds your Personal Allowance.
- T: Your tax code includes other calculations that require annual review by HMRC.
- NT: No tax is deducted from this income source.
To analyze your tax code and check if your payslip deductions are correct, use our Tax Code Analyzer.
Frequently Asked Questions (FAQ)
Q: Why does my tax code have a “K” prefix?
A: A “K” code means your taxable benefits or underpaid tax exceed your tax-free allowance. In effect, it adds taxable value to your payslip instead of deducting it.
Q: What does the “S” prefix mean?
A: An “S” prefix (e.g. S1257L) indicates your income is subject to Scottish Income Tax rates and bands.
Q: What should I do if my tax code is wrong?
A: You should contact HMRC immediately or update your details via the Personal Tax Account online. Employers cannot change your tax code without HMRC authorization.
Q: What is the “1257L” code?
A: This is the standard tax code, indicating you receive the standard tax-free allowance of £12,570 (£12,570 divided by 10 = 1257).
Q: How does marriage allowance affect my tax code?
A: If you receive transferred allowance from your partner, your code changes to 1383M. If you transfer your allowance, your code changes to 1131N.