UK Tax Codes—What Do They Mean?

Understanding your tax code is vital to avoid overpaying on your PAYE taxes. Unfortunately, the numbers and letters used in HMRC tax codes are both unintuitive and confusing. We hope to bring clarity to this seemingly complex topic with this in-depth guide. 

What is a tax code?

A tax code defines how much PAYE tax must be deducted from your salary or pension each month. HMRC works out the tax code and sends it to you. Your employer then deducts your PAYE tax from this amount and automatically sends it to HMRC each month. 

Do self-employed persons receive a tax code?

No, self-employed people don’t receive a tax code but receive a UTR (Unique Taxpayer Reference) instead. This UTR is a unique number assigned to you which never changes. 

Because self-employed people don’t receive a salary, it’s impossible to work out their fixed PAYE payments. Self-employed people submit a Self-Assessment Tax Return at the end of each fiscal year and must pay tax based on that. 

Your UTR never changes, even if you cease being self-employed for a time and then return to being self-employed later. You will continue to have the same UTR. 

Where do I find my tax code?

Unlike self-employed people, you will have a tax code for each source of income you have, and it can change frequently. You’ll find each of these codes in one of the following places:

• A direct letter sent to you from HMRC informing you of your tax code. 
• Online on the HMRC website. 
• Inside the HMRC mobile app. 
• On your payslip. 

How are tax codes structured?

A tax code will be either:

• A combination of numbers and letters
• Letters only

The number typically refers to your Personal Allowance but not always, such as when that number is combined with the letter K, which we discuss below. 

The letters have specific meanings, which we also explain in the next section. 

Understanding the letters and numbers in a tax code, with examples for each one

Although the HMRC website does provide a list of the letters it uses in tax codes, the explanation for those letters isn’t comprehensive. Below, we take these descriptions a step further and provide examples and real-world scenarios for each letter used in the HMRC tax code. 

BR:

Also known as the “emergency code”. If you’ve been assigned a BR tax code, it indicates that all of your income from this job is being taxed at the basic Income Tax rate of 20%, without the benefit of a tax-free Personal Allowance.

Typically, this suggests that you have more than one job, and your Personal Allowance is being applied to your other employment. Sometimes this may be used by your new employer running payroll while they are waiting to get your actual tax codes from HMRC.

Example: You have a second job that brings you some extra money. Your first job will likely have a code that represents your Personal Allowance. However, your second job is taxed 100%, designated by the BR letter code. 

C, C0T, CBR, CD0, CD1: (For Wales only)

“C” stands for “Cymru”—the Welsh name for Wales. HMRC adds a C to the beginning of tax codes when they’re being applied in Wales, and they have the same meaning as their England counterparts. 

For example, CBR is the Welsh version of the BR code (explained above). C0T is the equivalent of 0T (explained below), and so on. 

C is the equivalent of L (also explained below). 

Example: 1257C would mean (a) you live in Wales and (2) your Personal Allowance is £12,570. Any income over this amount gets taxed at 20% until the next higher tax bracket. 

D0 and D1:

The D0 and D1 codes are the same as the BR code such that all your income from this job or pension is taxed at a higher rate (used when you have more than one job or pension). 

Example: If you earn more than £50,270 a year, your second source of income (such as a pension or second job), would all be taxed at the higher rate of 40%, and you’d have a D0 tax code. Similarly, you’d get a D1 code on your secondary income if you earn more than £125,140 per year, and that second income would be taxed at 45%. 

K:

A K gets added to the beginning of your tax code if you have income that isn’t being taxed any other way, and that income is higher than your Personal Allowance. 

For most people, this occurs when you are:

• Paying off tax owed from a previous year through your wages or pension.
• Receiving taxable benefits, whether they are state benefits or company perks.

Your employer or pension provider deducts the tax owed on income that hasn’t been taxed directly from your wages or pension, even if the untaxed income is being paid to you by another organisation.

Example: If you owe HMRC £14,000, you might receive a K143 code, meaning your employer must add £1,430 to your income when calculating your PAYE tax. This figure is the difference between the Personal Allowance of £12,570 for 2024/2025 and £14,000. 

L:

This is the typical designation for tax codes without any modifiers. Most people will be on this tax code, meaning you’re entitled to the standard Tax-free Personal Allowance.

Example: A code of 1257L means your Personal Allowance is £12,570. After that, you’ll be taxed at the basic rate of 20% up to £50,270, then 40% up to £125,140 (higher rate), and 45% above that (additional rate). 

M and N:

Both of these are “Married Allowance”.

M means your partner has transferred 10% of their Personal Allowance to you.

An N means you’ve transferred 10% of your Personal Allowance to them. 

Example: Your spouse earns £11,700 per year so doesn’t pay tax. You earn £24,000 per year. Your mutual total taxable income is £12,546 (£24,000 – £12,570), for a total tax bill of £2,509.20 (20% of £12,546). 

Your spouse can transfer £1,260 (10%) of their Personal Allowance to you, giving us the following figures:

Spouse’s New Personal Allowance: £11,310 (£12,570 – £1,260)
Your New Personal Allowance: £13,830 (£12,570 + £1,260)

Your spouse must now pay tax on £390 (New Personal Allowance of £11,700 minus earnings of £11,310) while you must only pay tax on £10,170 (New Personal Allowance of £13,830 minus earnings of £24,000). 

Your combined taxable income is £10,560 (spouse’s taxable earnings of £390 plus your taxable earnings of £10,170), compared with £12,546 before. 

Previous tax bill: £2,509.20
New tax bill: £1,017

You save £1,492.20 in taxes. 

In the example provided, your tax codes would be:

Spouse: 1131N
You: 1383M

T:

The letter “T” indicates that your allowances are split between two or more sources of income. If you see a “T” at the end of your tax code, it means HMRC requires additional information from you to finalise your correct tax code

0T:

You have a zero Personal Allowance, typically because HMRC isn’t sure which tax code to give you. 

Example: You’ve started a new job and your employer doesn’t have the required info to get you a proper tax code. It’s vital to get this rectified at HMRC as soon as possible to avoid paying excess taxes. 

NT:

NT stands for “No Tax”—you don’t pay any tax on the income. 

Example: This could apply if you’re going through bankruptcy or if you’re a non-resident and already pay taxes in another country. 

S, S0T, SBR, SD0, SD1, SD2, SD3: (For Scotland Only)

The S stands for Scotland. So, SBR has the same meaning as BR but referring to Scotland, S0T has the same meaning as 0T, etc. 

S on its own is the equivalent of L. 

Scotland has different tax rates than England, so the SD0-SD3 codes refer to additional income taxed at the following rates:

• SDBR is taxed at the Scotland basic rate (20%)
• SD0 is taxed at the Scotland intermediate rate (21%)
• SD1 is taxed at the Scotland higher rate (41%)
• SD2 is taxed at the Scotland advanced rate (45%)
• SD3 is taxed at the Scotland top rate rate (48%)

Emergency tax code letters—W1, M1, and X

If you’ve recently started a new job, became an employee after being self-employed, or started receiving company benefits or the state pension, HMRC will assign you an emergency tax code letter while it works out the appropriate tax code for you. 

W1:

This emergency code is for weekly salary earners. 

M1:

The M1 emergency code is for monthly salary earners. 

X:

HMRC uses this code when it has no idea what category to place you in. 

Summary of tax codes

Below is a quick summary of all the tax codes for easy reference: 

Tax Code	Summary
BR	Emergency code. All income taxed at basic rate (20%) without Personal Allowance.
C, C0T, CBR, CD0, CD1	Welsh equivalents of standard codes.
D0	All income taxed at the higher rate (40%). Used when you have more than one job or pension.
D1	All income taxed at additional rate (45%). Used when you have more than one job or pension.
K	Indicates untaxed income exceeding the Personal Allowance, such as when you’re paying off a previous tax bill or receiving taxable company perks.
L	Standard code for basic Personal Allowance. This is the typical designation that most people will see.
M	Married Allowance. The M means you’ve received 10% of your partner’s Personal Allowance.
N	Married Allowance. The N means you’ve transferred 10% of your Personal Allowance to your partner.
T	Your tax allowances are being split between multiple income sources and HMRC requires more data to finalise it.
0T	You have a zero Personal Allowance for this income source.
NT	No tax to be paid on this income.
S, S0T, SBR, SD0, SD1, SD2, SD3	Scottish equivalents of England codes, but with Scotland tax rates.
W1	Emergency code for weekly salary earners.
M1	Emergency code for monthly salary earners.
X	Emergency code when HMRC lacks sufficient information.

2025 Updates to UK Tax Codes

Even though tax code formats haven’t changed this year, HMRC’s approach to assigning them has. These updates can affect your take-home pay and compliance — especially if you’re a director, freelancer, or landlord. Here’s a quick breakdown:

Update	What’s Changed in 2025	Who It Affects	Why It Matters
More BR Codes Issued	BR (basic rate 20%) codes are being applied more frequently to second jobs or multiple income streams — even if it’s not accurate.	Employees with second jobs, part-time workers, freelancers doing PAYE work	May result in overpayment unless corrected early
Aggressive Use of K Codes	K codes are now used more to recover Self Assessment underpayments and account for benefits in kind (e.g. company car, health cover).	Directors, landlords, higher earners with perks	Reduces personal allowance and increases PAYE deductions
Emergency Codes Applied Faster	W1 / M1 / X codes are issued sooner when P45s or starter forms are missing.	New hires, job changers, anyone with delayed paperwork	Leads to higher tax deductions until corrected
Mid-Year Code Adjustments	HMRC is adjusting codes more frequently during the tax year, not just at the start.	Directors who file Self Assessment, or those with income changes	Sudden take-home pay drops if you’re not monitoring updates
Self Assessment Recovery via PAYE	HMRC is increasingly collecting unpaid Self Assessment tax via updated PAYE codes.	Anyone who owes money from a prior year	Tax is silently deducted from salary — easy to miss without checking code

Looking for the latest tax code guidance? Read our 2025 UK Tax Code Changes Explained with real-world pay examples and actionable tips.

Get help with your employees’ tax codes

Although HMRC provides an online checker for you to understand the meaning of your employees’ tax code, the tool lacks a comprehensive description of all the codes, preventing you from seeing if you are better suited to having a different code. 

The wrong tax code can result in excess payments to HMRC, so it’s vital to get this right. In this regard, we can help. Fusion Accountants specialises in helping businesses of all types with their UK accounting needs. We can help you ensure your employees have the correct tax codes so you don’t overpay on their taxes. To learn more, contact us here.

Frequently asked questions about uk tax codes

1. What does a UK tax code mean?
A UK tax code tells your employer or pension provider how much Income Tax to deduct from your pay. It’s worked out by HMRC and is usually shown as a mix of numbers and letters (e.g., 1257L).

2. Where can I find my current tax code?
You can see your tax code on your payslip, in your HMRC online account, through the HMRC mobile app, or in letters HMRC sends directly to you.

3. Do self-employed people get a tax code?
No. Self-employed individuals don’t receive tax codes. Instead, they use a Unique Taxpayer Reference (UTR) and file a Self Assessment return to pay tax.

4. What do the numbers in my tax code mean?
The number usually reflects your tax-free Personal Allowance. For example, 1257L means you can earn £12,570 before paying Income Tax in 2024/25.

5. What do the letters in a tax code stand for?
Letters show HMRC adjustments. Examples:

• L = standard allowance
• M/N = Marriage Allowance transfer
• K = you owe tax or receive benefits in kind
• BR, D0, D1 = all income taxed at basic, higher, or additional rate
• S or C = Scottish or Welsh codes

6. What is an emergency tax code?
If HMRC doesn’t have full details, it may give you an emergency code such as W1, M1, or X. This often happens when starting a new job or switching from self-employment.

7. Why would I have a K code?
A K code is applied if untaxed income or benefits are higher than your allowance. It increases the tax taken from your salary to recover underpaid tax or account for perks like a company car.

8. How often do tax codes change?
HMRC can adjust your tax code during the year if your circumstances change, such as getting a second job, new benefits, or owing tax from a previous year.

9. What happens if my tax code is wrong?
If your tax code is incorrect, you may overpay or underpay tax. You can check it with HMRC online or contact your employer’s payroll team.

10. What are the key UK tax code updates for 2025?
In 2025, HMRC is:

• Using BR codes more often for second jobs.
• Applying K codes more aggressively to recover underpayments.
• Issuing emergency codes (W1/M1/X) faster when starter forms are missing.
• Adjusting codes mid-year more frequently.

11. Can employers check employee tax codes?
Yes. Employers can use HMRC’s online tool, but many rely on accountants to review codes in detail. Having the wrong code can mean overpaying staff tax.