Public guidance notes that incorrect tax codes can lead to overpayment, which can be costly to individuals.
How to interpret the tax rate you should pay by tax code? Can the overpayment be refunded? This article will continue to decipher payslip information for you.
What is a Tax Code?
A tax code tells your employer how much tax to deduct from your pay and reflects your personal tax-free allowance. Different circumstances can produce different codes. Your payslip will show a code made of numbers and letters.
The digits (ignoring suffix letters) roughly represent the annual personal allowance divided by 10. For 2025/26 and 2026/27, the standard England/Wales code is 1257L, which corresponds to a personal allowance of £12,570 per year (about £242 per week or £1,048 per month).
Special Tax Codes
The tax codes mentioned above are not identical, and you may see special cases in different situations.
Tax codes starting with S or C:
- S prefix: Scottish taxpayer; tax uses Scotland’s rates (e.g., S1257L).
- C prefix: Welsh taxpayer; tax uses Welsh rates (e.g., C1257L).
Tax code starting with BR:
This means that your employer may not be using all personal information, so all income is charged basic income tax of 20%. It is also possible that you have two jobs and HMRC has split the allowance between the other income.
Tax codes without numbers or tax codes starting with D followed by numbers:
- D0: All income from this employment is taxed at the higher rate of 40%.
- D1: All income from this employment is taxed at the additional rate of 45%.
Tax code starting with K:
When your tax code begins with K, be extra careful. This means you have untaxed income that is higher than your allowance. In 2026, this is frequently used to recover Savings Interest or the Winter Fuel Payment from higher earners. You should check your HMRC Personal Tax Account to see the specific reason for a K code.
Emergency Code
You may be placed on an emergency tax code when HMRC has not yet updated your tax details. An emergency code assumes the basic personal allowance without considering other allowances or deductions, which may result in higher tax temporarily.
Common emergency codes include 1257L W1, 1257L M1, and 1257L X. Once the correct tax code is set, payroll adjustments typically occur in the next pay cycle.
What if the Tax Code is Wrong?
Use the HMRC app or GOV.UK “Check your Income Tax” service to review and update your details (including estimated income).
If HMRC’s estimate is incorrect, update it and/or contact HMRC to correct the code. Corrections typically take effect in the next payroll cycle; timing varies by employer.
If you are a client, please contact our accounting team for assistance.
