Tax code: what's my HMRC tax code, 1257L percentage, UK tax codes 2024/25 meaning - and emergency tax code

With a new UK tax year coming in, a financial spring clean may be at the top of your to-do list, especially as several key household bills are getting more expensive in April 2024.

The tax year in the UK is a crucial period that affects both individuals and businesses, defining when taxes are assessed and collected by HM Revenue & Customs (HMRC).

Understanding the start and end dates of the tax year is essential, whether you’re employed, self-employed or running a business.

One of the key aspects of the new tax year for employees is the adjustment of tax codes and allowances. Employers use these tax codes to calculate the amount of tax to deduct from their employees' pay.

Tax codes might look confusing to begin with but are actually simple to understand. They are used by employers and pension providers to work out how much of your income is tax free, how much tax you should pay and if there are any other circumstances to consider.

Read more: April money: benefits and savings changes in new tax year - from child benefit to ISAs and National Insurance

What does the tax code mean?

The code tells your employer or pension provider how much tax you are going to pay each month until the following April. 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% increase to the income tax 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 on any money earned above 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 of your income from this job or pension is taxed at the higher rate (for workers with more than one job)
• D1 - All of your income from this job or pension is taxed at the additional rate (for workers with more than one job)
• NT - This code shows 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 of your income from this job or pension is taxed at the higher rate in Scotland
• SD2 - All of 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 of your income from this job or pension is taxed at the higher rate in Wales
• CD1 - All of 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 the standard 1257L code.

They are temporary and will only be on your payslip if you have started a new job, moved to a full time job after being self-employed, are 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.