What is a UK tax code? What does it mean? How does it impact your wages?

These are some incredibly common questions in the UK. Despite around three quarters of working adults are employed directly, meaning they receive a payslip of some kind, many people do not actually understand how their tax is calculated, or what their tax code means. This can lead to errors not being spotted for months, resulting in paying too much (or worse, too little) tax.

So, in this post, we’re going to look at how you can quickly and efficiently read your tax code, and in turn, how to check whether the code you’ve been issued is correct!

---

---

Where Do I Find My Tax Code?

Your UK tax code is made up of a combination of numbers and letters.

At the start of each new tax year, you are issued a tax code by the Government (HMRC). This is usually sent via letter to your home address, as well as to your employer (if you have one) so that they can calculate how much Income Tax you should pay. If you have not received a letter from HMRC, it should also be displayed on your Payslip.

NOTE: You can also find your tax code by signing up or logging in to your Personal Tax Account (via Government Gateway) here.

---

What Do The Numbers Mean?

The numbers tell you how much tax-free Personal Allowance you are entitled to for the current tax year. In other words, it lets you know how much money you can earn before paying any Income Tax.

One of the most common Tax Codes for 2023/2024 is “1257L”.

To calculate how much the Personal Allowance is for this tax code, simply multiply the number by 10.

1257 X 10 = 12570

Therefore, the tax code “1257L” means you have a Personal Allowance of £12,570.

---

What Do The Letters Mean?

The letters represent a specific tax situation. For the example above, the “L” in “1257L” means you are entitled to the standard Personal Allowance. If this were instead an “S”, this means your income or pension is taxed using the rates set in Scotland. For Wales, this is “C” instead.

Below is a list of the most common Tax Code letters you might encounter.

Code	Description
L	You’re entitled to the standard tax-free Personal Allowance
S	Your income or pension is taxed using the rates in Scotland
C	Your income or pension is taxed using the rates in Wales
M	You’re receiving part of your partner’s Personal Allowance via Marriage Allowance
N	Your partner receives part of your Personal Allowance via Marriage Allowance
T	Your tax code includes other calculations to work out your Personal Allowance
NT	You’re not paying any tax on this income
K	You have a NEGATIVE Personal Allowance due to company benefits or repaying overdue tax from previous years
0T	Your Personal Allowance has been used up, or you’ve started a new job and your employer does not have enough information
BR	All your income from this job or pension is taxed at the Basic Rate
D0	All your income from this job or pension is taxed at the Higher Rate
D1	All your income from this job or pension is taxed at the Additional Rate
SD2	All your income from this job or pension is taxed at the top rate in Scotland
W1	Emergency Tax Code: a temporary code which assumes you receive the standard Personal Allowance until more information is provided by you or your employer
M1	Emergency Tax Code: Same as above (W1)
X	Emergency Tax Code: Same as above (W1, M1)

---

Putting It All Together…

Together, this combination of numbers and letters tell you everything you need to know regarding how you will be taxed in the current year.

Lastly, it’s important to note that you can have more than one tax code. For example, if you are employed part-time at two different companies, or if you are employed and self-employed at the same time.

Armed with this information, you can now check your tax code(s) and ensure the correct code has been issued. HMRC don’t always get it right!