A PAYE (Pay As You Earn) tax code is issued by HMRC and tells employers how much income tax to deduct from an employee’s salary. It’s your responsibility to check that you’re on the right tax code, not your employer’s.

Most people will have a tax code like 1257L - this is the standard code for the 2025/26 tax year, which gives a £12,570 tax-free personal allowance.

But not everyone will have this code. Reasons for a different code can include:

• Having more than one job or pension
• Receiving benefits in kind (e.g. company car, private medical insurance)
• Underpaid tax from previous years
• Marriage Allowance claims
• Student loan repayments or adjustments

Other common codes include:

• BR – all of your salary or pension will be taxed at the basic rate of tax (currently 20%) – this is common if you change jobs during the year or if it’s a second job
• 0T – you won’t get any personal allowance with this tax code as HMRC expect your earnings to be over £125,140
• D0 – all of your salary or pension will be taxed at the higher rate of tax (currently 40%)
• D1 – all of your salary or pension will be taxed at the additional rate of tax (currently 45%)

The letters at the end of your tax code are for different situations:

• L – the numbers show how much tax free allowance you get
• K – the numbers show how much additional income you need to pay tax on – this can happen where you have high benefits in kind/low personal allowance
• S – Scottish tax rates apply
• C – Welsh tax rates apply
• W1/M1 or X – your salary or pension will be taxed on a single week/month basis (usually tax is calculated cumulatively for the tax year to date) 

Tax codes are generally cumulative so issues can be fixed easily during the year, but checking and correcting any errors before your April salary is processed means you won’t have any shocks with your first pay of the year.

If you’re not sure what your tax code, sign up to or log into your personal tax account (https://www.gov.uk/personal-tax-account).

Although it’s ultimately an employee’s responsibility to check their own tax codes, and you won’t have any information about how the tax code has been calculated, it’s worth reviewing tax codes prior to running the first payroll. This means you’re less likely to have employees querying their pay, HMRC sending updates later and time-consuming adjustments/re-runs.

1. Download the latest codes
2. Check for any non-cumulative or BR codes
3. Check that employees earning more than £125,140 are on a 0T or K tax code
4. Encourage employees to check their codes

It’s far easier to get it right from the start.

We’re here to help. At CJL Accountancy, we offer friendly, expert payroll support as part of our accounting compliance packages so you can focus on running your business without the stress of tax surprises.