UK Tax Codes Explained: What 1257L, BR, K, and NT Mean

Your tax code is a short alphanumeric combination used by your employer or pension provider to calculate the exact amount of Income Tax to deduct from your pay under the PAYE system. Having the wrong tax code is one of the most common administrative errors in the UK, often leading to workers overpaying hundreds of pounds or, conversely, facing an unexpected, expensive tax bill at the end of the year. In this comprehensive guide, we explain the anatomy of UK tax codes, break down what each prefix and suffix letter means, and show you exactly how to spot errors and get them fixed.

The Anatomy of a Tax Code

A standard UK tax code consists of a number followed by a letter—for example, 1257L. The numbers tell your employer how much tax-free income you are allowed to earn in that tax year, while the letter provides instructions on how your tax should be calculated.

To find the tax-free allowance represented by the number, you simply multiply the code’s digits by 10. For instance: 1257 multiplied by 10 equals £12,570, which is the standard UK Personal Allowance. If your code is 1150L, you receive £11,500 of tax-free allowance, indicating that £1,070 has been deducted from your allowance, typically due to a taxable benefit like a company car or medical insurance.

Decoding the Letters: Prefixes and Suffixes

HMRC uses specific letters to handle different employment scenarios. Here is a comprehensive breakdown of the letters you may find on your payslip:

• L: The most common letter. It means you are entitled to the standard personal allowance of £12,570.
• BR: Stands for “Basic Rate”. All income from this source is taxed at the basic rate of 20% without any tax-free allowance. This is usually applied to a second job.
• K: A prefix code (e.g., K450). It indicates that your company benefits, state pension, or underpaid tax from previous years exceed your personal allowance. In effect, it acts as negative tax-free allowance, meaning your employer adds this amount to your taxable earnings.
• M: Indicates you have received a transfer of Marriage Allowance (10% of your partner’s personal allowance, adding £1,260 to your tax-free threshold).
• N: Indicates you have transferred a portion of your Marriage Allowance to your partner, reducing your personal allowance by £1,260.
• T: Used if your tax calculations are complex or need annual review by HMRC. It is also used to prevent your personal allowance from automatically updating.
• OT: Your personal allowance has been completely used up, or your employer does not have the details required to assign a code, meaning your entire income is taxed without any allowance.
• NT: “No Tax”. No income tax is deducted from this source (often used for specific foreign workers or individuals under special tax exemptions).
• S Prefix (e.g., S1257L): Indicates your income is subject to Scottish Income Tax rates and bands, which are set independently by the Scottish Government.
• C Prefix (e.g., C1257L): Indicates your income is subject to Welsh Income Tax rates.

To analyze the specific code printed on your latest payslip and verify whether your payroll tax deductions are mathematically correct, use our Tax Code Analyzer.

What are Week 1 / Month 1 Tax Codes?

If you see W1, M1, or an asterisk (*) at the end of your tax code (e.g., 1257L W1/M1), you have been placed on a non-cumulative emergency tax code. Under normal circumstances, your tax is calculated cumulatively: your employer looks at your total earnings and total tax paid since the start of the tax year (April 6th) to determine your deduction. This ensures your personal allowance is spread evenly over 12 months.

On a W1/M1 code, this cumulative history is ignored. Your employer calculates tax purely on what you earn in that specific week or month as if it were the first pay period of the tax year. This prevents you from receiving refunds for periods you did not work and can result in higher tax deductions if your income fluctuates.

How to Fix an Incorrect Tax Code

If you believe your tax code is wrong, do not wait for your employer to fix it. Employers have no legal authority to alter your tax code without direct written instruction from HMRC. If you are overpaying, you must take action to get your money back. The quickest way to resolve this is by logging into your HMRC Personal Tax Account online or via the HMRC App, where you can check your estimated income and update details about company benefits. Alternatively, you can contact HMRC directly by phone. Once HMRC updates your code, they will issue a digital “Coding Notice” directly to your employer’s payroll system, and any overpaid tax will automatically be refunded in your next paycheck.

Frequently Asked Questions (FAQ)

Q: Why has my tax code changed mid-year?
A: Tax codes change when your financial circumstances change. Common reasons include starting or stopping a company benefit (like a company car or health insurance), starting a secondary job, or HMRC correcting underpaid tax from a previous year.

Q: What does the code BR mean?
A: BR stands for Basic Rate. It means you are taxed at a flat rate of 20% on all earnings from this source, without any tax-free allowance. This code is standard for secondary jobs where your primary job is already utilizing your personal allowance.

Q: What is the difference between a K code and other codes?
A: Most codes start with numbers and end with a letter, representing an allowance. A K code starts with “K” and is followed by numbers. This means your deductions exceed your personal allowance, resulting in an increased taxable salary. HMRC caps K-code deductions so they cannot take more than 50% of your gross pay in a single period.

Q: How long does it take for a tax code change to update?
A: Once HMRC issues a new tax code, it usually takes between 1 to 2 payroll cycles for your employer’s system to process the update and adjust your take-home pay.