Understand Your Payslip, Tax Code and PAYE / Lesson 3 of 8

What your tax code actually means

Lesson 6 min read Your tax code Includes a calculator

Add a zero to the number and you have your tax-free pay. That is genuinely the whole trick.

The short answer

✓ The number times ten is your tax-free pay for the year
✓ BR, D0 and D1 mean no allowance is applied to that income
✓ S and C prefixes follow where you live, not where you work
✓ A K code means deductions exceed your allowance, capped at half your pay

The number

The number in your tax code is your tax-free allowance for the year, divided by ten. Multiply it back up and you have the amount you can earn before paying income tax.

Reading the number

Standard personal allowance    £12,570
Divided by 10                    1257
Your code                       1257L

So 1257L means £12,570 of tax-free pay this year.

If your code is lower than the standard, something is reducing your allowance. If it is higher, something is increasing it.

The letters

Letter	Meaning
L	The standard personal allowance
M	You received Marriage Allowance from your partner
N	You transferred Marriage Allowance to your partner
BR	All of this income is taxed at basic rate, no allowance here
D0	All of this income at higher rate
D1	All of this income at additional rate
0T	No allowance at all, usually because HMRC lacks information
NT	No tax deducted
K	Deductions exceed your allowance, so pay is added rather than freed

A leading S means Scottish rates apply, and a leading C means Welsh. Those prefixes are set by where you live, not where you work.

Why BR is not automatically wrong

BR on a second job is usually correct: your allowance is already being used by the first job, so every pound of the second is taxable. BR on your only job almost always is wrong, and means HMRC has not linked your allowance to that employment.

The bit HMRC does not spell out

A K code is not a penalty and does not mean you have done something wrong. It appears when deductions, typically a company car or tax owed from an earlier year, exceed your personal allowance. Instead of freeing pay from tax, the code adds notional pay to be taxed.

The protection worth knowing: a K code can never take more than half of your gross pay in tax in a pay period. If your code looks alarming, that cap is doing quiet work in the background.

Common mistakes

Assuming a low number is an error. Benefits and untaxed income legitimately reduce it.
Assuming BR is always wrong. On a second job it is usually right.
Ignoring the S or C prefix. It is based on where you live.
Reading a K code as a punishment. It is arithmetic, not a judgement.

Try it on your own numbers

This is the same calculator as the full tool page, using 2026/27 rates.

Check your tax code (2026/27)

It's on your payslip, P45/P60 or any HMRC letter. The verdict updates instantly - no sign-up.

Your tax code Where do you live?

This is my only job or pension Untick if you have a second job or a separate pension. I get taxable benefits or a taxable State Pension Company car, medical insurance, State Pension, etc. Another job/pension also has a 1257L-style code i.e. a full tax-free allowance on more than one income. Marriage Allowance

Next steps

Tax Rebate Checker

See what else you could claim back

Income Tax calculator

Check the tax you should pay

Take-home pay

What should land in your account

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What the UK tax codes mean (2026/27)

Code	What it means
1257L	The standard code - full £12,570 tax-free Personal Allowance. Most people with one job and no benefits.
BR	All income taxed at 20% (basic rate) with no allowance. Normal for a second job/pension; wrong on your only job.
D0 / D1	All income taxed at 40% (D0) or 45% (D1). Usually a second job for higher/additional-rate taxpayers.
0T	No Personal Allowance - taxed from the first pound. Often happens after a new job without a P45; usually means overpaying.
K (e.g. K475)	Deductions are bigger than your allowance, so extra tax is collected. Common with company cars or tax owed.
M / N	Marriage Allowance: M = you received 10% of your partner's allowance; N = you gave 10% away.
T	HMRC reviews your code individually - other items are included in the calculation.
W1 / M1 / X	Emergency code - temporary and worked out on this pay period only. Often leads to overpaying until HMRC updates it.
S / C prefix	S = Scottish tax rates; C = Welsh (Cymru) tax rates, based on where you live.

Key takeaways

✓ The number times ten is your tax-free pay for the year
✓ BR, D0 and D1 mean no allowance is applied to that income
✓ S and C prefixes follow where you live, not where you work
✓ A K code means deductions exceed your allowance, capped at half your pay

Check you have got it

3 quick questions. No score is kept, and you can change your mind.

1. What does the number in tax code 1257L represent?

2. Your second job has a BR code. Is that wrong?

3. What does a K code mean?

Sources

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‹ How gross becomes net Next: Emergency codes and why they happen ›

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