Tax code
The letters and numbers HMRC gives your employer to work out how much tax to take from your pay.
Your tax code tells your employer or pension provider how much tax-free pay you get before income tax starts. The numbers are your allowance with the last digit removed and the letters flag your situation: 1257L is the standard code, BR taxes everything at 20%, K codes mean deductions exceed your allowance, and S or C prefixes apply Scottish or Welsh rates.
A wrong code is the most common reason people overpay or underpay tax, especially after changing jobs, getting a company benefit or having more than one income. Check yours against our tax code guides, which explain every common code and what to do if it looks wrong.
A £4,000 company benefit turns the standard 1257L into 857L (£12,570 minus £4,000, last digit dropped). And the cost of a wrong code is real: someone on £30,000 left on a BR code pays £6,000 in tax instead of the correct £3,486, overpaying £2,514 a year until it is spotted.