Understanding your tax code
Your tax code is a mix of numbers and letters. It tells your employer or pension provider how much tax to take from what you’ve earned, before they pay you.
Your tax code is on your payslip
If you work for an employer, you’ll get a payslip whenever you get paid. This is a paper or digital document that tells you everything you need to know about your pay.
It shows you:
- how much money you earned from working
- how much Income Tax and National Insurance has been taken off
- any pension contributions
If you’re receiving a pension, you’ll find your tax code on something called your P60. This is a statement your pension provider will send you each year between April and May. If your tax code changes, they’ll also send you a payslip which will show your new code.
It’s quick and easy to check your tax code any time on our HMRC app. You can find out how to download it on GOV.UK.
How your tax code works
Most people are allowed to get a certain amount of income each year before they start paying any tax at all. That tax-free amount is called your Personal Allowance. You can find out more about it on our What is a tax-free Personal Allowance page.
If your total income for the year is more than your Personal Allowance, you’ll pay tax on it.
Your tax code tells your employer exactly how much you can earn before you have to start paying tax.
For example, in the most common tax code, 1257L, the number 1257 tells your employer that you can earn £12,570 in a tax year before you start paying tax.
So, if you’re paid monthly, you can earn up to £1,047 a month before you start to pay tax.
The letter at the end tells them a bit more about your situation. L means you get the standard tax-free Personal Allowance. You can find more about the different letters on GOV.UK.
We work out your tax code
We are HMRC (His Majesty’s Revenue and Customs), the part of the government that deals with tax. We automatically work out what your tax code should be behind the scenes. If you’re employed, we then send it to your employer.
Normally, you don’t need to do anything, but you should let us know if your situation changes – like if you start working for yourself, move home or get married.
Your employer uses your tax code to take what you owe from your wages before you’re paid. It’s designed to make your life simple.
Key thing to remember:
Sometimes changes in your life mean your tax code needs to change too. Like if you get a pay rise, start a second job, or earn money from somewhere else.
If it does need to change, we’ll let you know. We’ll also send your new code to your employer and pension providers (if you have them).
Right tax code, right tax
If your tax code is right, it means you’re paying the right amount of Income Tax.
If your tax code is wrong, two things can happen:
- you might pay too much tax so get paid less than you should
- you might pay too little tax so end up owing us tax later
Helpful tip:
Checking your tax code every now and again helps make sure you pay the right amount.
When you get your first payslip it’s a good idea to:
- look at the tax code on it. If you think it might have changed, you can always check your details on GOV.UK or by using our app
- put your payslip in a safe place
Tell us if you think it’s wrong
If you think your tax code is wrong, don’t worry. We’re here to help and can check and correct it if we need to. You can find out how to let us know on GOV.UK.