Tax Code
A code issued by HMRC to your employer to tell them how much income tax to deduct from your pay each period. The most common code is 1257L, representing the standard Personal Allowance of £12,570 divided by 10 (1257) with the letter L indicating a standard tax-free amount. Your code may be adjusted to reflect benefits in kind, underpaid tax from prior years, Marriage Allowance, or Blind Person's Allowance.
How it works
HMRC generates your tax code based on the information it holds about your income, benefits, and any adjustments from previous years, then sends it to your employer or pension provider so they can apply it through PAYE. Most codes end in a letter — L for the standard Personal Allowance, but other letters signal special circumstances such as Marriage Allowance transfers, Blind Person's Allowance, or Scottish taxpayer status, prefixed with an S.
When your circumstances change — a new job, a company benefit like a car, or underpaid tax from an earlier year — HMRC adjusts the number in your code to effectively raise or lower your tax-free amount. A benefit in kind reported on a P11D, for example, reduces your allowance by the taxable value of the benefit, which shows up as a smaller number in your tax code rather than as a separate deduction on your payslip.
A wrong tax code is one of the most common PAYE errors, often caused by a late P45 from a previous employer, an emergency code being left in place too long, or HMRC not being told about a change such as starting a second job. Checking your tax code against your Personal Allowance and any known adjustments each time your payslip or P60 arrives is the simplest way to catch an error before it compounds over the year.
Example: how a company car benefit changes your tax code
Someone with the standard Personal Allowance of £12,570 would normally have the tax code 1257L. If their employer provides a company car with a taxable P11D benefit value of £3,000, HMRC reduces the allowance used in the code by that amount: £12,570 − £3,000 = £9,570.
The resulting tax code becomes 957L, meaning £9,570 of income is now tax-free instead of £12,570 — the extra £3,000 that would otherwise have been tax-free is taxed instead, spread evenly across the employee's pay through PAYE.
Frequently asked questions
What should I do if I think my tax code is wrong?
Contact HMRC directly, by phone, online, or through your personal tax account, with details of your income and any benefits — you don't need to go through your employer, since they can only apply the code HMRC issues them.
What is an emergency tax code and when does it apply?
An emergency code is a temporary code your employer uses when they don't yet have your full tax history, most often when you start a job without a P45 — it can result in overpaying tax initially, usually corrected automatically once HMRC has your full details.
Can I have more than one tax code at once?
Yes — if you have more than one job or pension, each payer operates its own tax code, and typically only one of them applies your full Personal Allowance while the others tax income at a flat rate from the first pound.
Related Terms
PAYE
Pay As You Earn — the system by which employers deduct income tax and National Insurance directly from employees' wages before paying them, and remit the deductions to HMRC on their behalf.
Personal Allowance
The amount of income you can earn in a tax year before paying income tax, currently £12,570 and frozen until April 2031 (the freeze was extended by three years at the Autumn Budget 2025).
Marriage Allowance
Allows one partner in a marriage or civil partnership to transfer £1,260 of their unused Personal Allowance to the other, reducing the recipient's tax bill by up to £252 per year.
Blind Person's Allowance
An additional tax-free allowance of £3,250 (2026/27) available to registered blind individuals, added on top of the Personal Allowance to reduce taxable income.
P45
A form your employer gives you when you leave a job, showing your tax code, total pay, and total tax paid in the current tax year up to your leaving date.
P60
An annual certificate your employer gives you at the end of the tax year (by 31 May) summarising your total pay and total tax deducted under PAYE for the year.
Try the calculator
Use our free tool to see how tax code affects your tax.