What is Tax Code?
An HMRC code (e.g. 1257L) that tells your employer how much tax-free income you are entitled to.
Key Facts
- ✓ Most common code: 1257L (£12,570 allowance)
- ✓ Number = tax-free allowance divided by 10
- ✓ Scottish prefix: S (e.g. S1257L)
- ✓ Welsh prefix: C (e.g. C1257L)
- ✓ Emergency codes: 1257L W1/M1 (non-cumulative)
- ✓ Check via HMRC Personal Tax Account or payslip
Explanation
Your tax code is a series of numbers and letters used by your employer (or pension provider) to calculate how much income tax to deduct from your pay. The most common tax code for 2025/26 is 1257L, which represents a Personal Allowance of £12,570. The number in the code is your tax-free allowance divided by 10, and the letter indicates your situation. Common letters include: L (standard allowance), M (Marriage Allowance received), N (Marriage Allowance transferred), T (HMRC needs to review), BR (all income taxed at basic rate, no allowance), and D0 (all taxed at higher rate). Scottish taxpayers have an 'S' prefix (e.g. S1257L) and Welsh taxpayers have a 'C' prefix. If your code includes K, it means your deductions exceed your allowance and tax is owed on the difference. You can check your tax code on your payslip, P60, or via your HMRC Personal Tax Account online.
Try the calculator: Use our free calculator to see how tax code affects your finances.
Salary Calculator →Other Glossary Terms
The system HMRC uses to collect income tax and National Insurance directly from employee wages.
National InsuranceA UK tax on earnings and self-employed profits that funds the state pension, NHS, and benefits.
Personal AllowanceThe amount of income you can earn each year before paying income tax — currently £12,570.
Basic Rate (20%)The 20% income tax rate applied to taxable income between £12,571 and £50,270.
Higher Rate (40%)The 40% income tax rate applied to taxable income between £50,271 and £125,140.
Additional Rate (45%)The 45% income tax rate applied to taxable income above £125,140.
Frequently Asked Questions
What does tax code mean?
An HMRC code (e.g. 1257L) that tells your employer how much tax-free income you are entitled to.
Why does tax code matter?
Understanding tax code helps you make informed financial decisions and ensure you pay the correct amount of tax. Getting it wrong could mean overpaying or underpaying HMRC, which may result in penalties or missed savings. Use our calculators to see how tax code applies to your personal situation.
Where can I find more information about tax code?
HMRC publishes official guidance on GOV.UK for all UK tax topics. For a quick overview, our glossary entries are written in plain English and updated each tax year. You can also use our free online calculators to model different scenarios and understand how changes to your income, deductions, or allowances affect your overall tax position.