UK tax codes, allowances and getting it right

What the code means

Your UK tax code tells your employer how much tax-free pay to give you across the year. 1257L means roughly 12,570 of tax-free income, spread evenly across your pay periods.

The letters carry meaning: L is the standard allowance, BR taxes everything at basic rate (common on a second job), D0 at higher rate, NT means no tax, and K codes mean untaxed benefits exceed your allowance.

When it goes wrong

Codes drift out of date after a job change, a company car, a bonus, or a second income. A W1/M1 suffix means each pay period is taxed in isolation — you often overpay until it is corrected. Overpayments are usually refunded automatically at year end, but you can reclaim sooner.

Allowances above the basics

Income above 100,000 tapers the Personal Allowance away, creating a very high effective marginal band. Marriage Allowance can transfer part of an unused allowance to a spouse. Both are checked, not automatic.

The habit

Check the code on your first payslip of each tax year and after any change in pay or benefits. Five minutes there beats a year of quiet overpayment.