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Tax codes 2022: full list of UK tax codes for 2022/23 and what they mean, HMRC deductions and 1257L explained

Are you paying the right amount of tax? Here’s how to check and make sense of the numbers and letters that make up your tax code

Making sense of your tax code will help you understand how much of your salary is being deducted for tax purposes.

This deduction happens before you receive your wage and if the numbers and letters are wrong in your tax code then you could be paying too much, or even too little.

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The tax code might look confusing to begin with but is fairly straightforward to understand, with most people’s code starting with a number and ending with a letter.

Chancellor Rishi Sunak has made changes to the Personal Allowance for the 2021/22 financial year. (Pic: Getty)

It is used by employers and pension providers to work out how much of your income is tax free, how much tax you pay and if there are any other circumstances to consider.

What does the tax code mean?

The code tells your employer or pension provider how much tax you are to pay each month.

The numbers in your code indicate how much of your annual income is tax free and the letter reflects your current employment status.

The tax code 1257L is most common for people who have one job or pension.

It changed from 1250L from the 2020/21 tax year after a 0.5 percent increase to the Personal Allowance - from £12,500 to £12,570.

The Personal Allowance is the amount of taxable income a person can earn without needing to pay tax on it, with tax rates kicking in beyond this threshold.

What are the tax code letters and what do they mean?

Letters in your tax code refer to your situation and how it affects your Personal Allowance.

  • L - This entitles you to the standard tax-free Personal Allowance
  • M - This code shows you’ve received a transfer of 10% of your partner’s Personal Allowance
  • N - This code means you’ve transferred some of your Personal Allowance to your partner
  • T - This signals that other calculations are included in working out your Personal Allowance
  • 0T - This means your Personal Allowance has been used up or that your new employer doesn’t have the details they need to give you a tax code
  • BR - This code means all the income from this job or pension is taxed at the basic rate, usually used if you have a second job or pension
  • D0 - All your income from this job or pension is taxed at the higher rate (for workers with more than one job)
  • D1 - All your income from this job or pension is taxed at the additional rate (for workers with more than one job)
  • NT - This shows that you are not paying any tax on this income

What do the tax code letters mean in Scotland?

  • S - This shows your income or pension is taxed using the rates in Scotland
  • S0T - This code means your Personal Allowance has been used up, or your employer does not have the details they need to give you a tax code in Scotland
  • SBR - This means all your income from this job or pension is taxed at the basic rate in Scotland
  • SD0 - This code shows all your income from this job or pension is taxed at the intermediate rate in Scotland
  • SD1 - All your income from this job or pension is taxed at the higher rate in Scotland
  • SD2 - All your income from this job or pension is taxed at the top rate in Scotland

What do the tax code letters mean in Wales?

  • C - This means your income or pension is taxed using the rates in Wales
  • C0T - This code means your Personal Allowance has been used up, or your employer does not have the details they need to give you a tax code in Wales
  • CBR - This shows all your income from this job or pension is taxed at the basic rate in Wales
  • CD0 - All your income from this job or pension is taxed at the higher rate in Wales
  • CD1 - All your income from this job or pension is taxed at the additional rate in Wales

What are Emergency Tax Codes?

Emergency tax codes can be spotted with the addition of W1, M1 or X following 1257L.

They are temporary and commonly found on workers’ payslips if you have started a new job, started full time work after being self-employed, getting company benefits or a state pension.

What are K codes?

People with an income that is not being taxed another way and is worth more than your tax free allowance will have a tax code beginning with a K.

This can happen if you are paying tax owed from a previous year or if you are getting benefits - be it state or company - which you need to pay tax on.

Tax bands (excluding Scotland)

  • Personal Allowance - Up to £12,570 - 0%
  • Basic rate - £12,571 to £50,270 - 20%
  • Higher rate - £50,271 to £150,000 - 40%
  • Additional rate - over £150,000 - 45%

Tax bands in Scotland

  • Personal Allowance - Up to £12,570 - 0%
  • Starter rate - £12,571 to £14,667 - 19%
  • Basic rate - £14,668 to £25,296 - 20%
  • Intermediate rate - £25,297 to £43,662 - 21%
  • Higher rate - £43,663 to £150,000 - 41%
  • Top rate - over £150,000 - 46%