Archive Website of the UK government

What is a tax code?

A tax code is usually made up of several numbers and a letter, for example: 117L or K497.

If your tax code is a number followed by a letter

If you multiply the number in your tax code by ten, you will get the total amount of income you can earn in a year before paying tax.

The letter shows how the number should be adjusted following any changes to allowances announced by the Chancellor - common tax code letters are explained below.

Common tax code letters and what they mean

Other tax codes

If your tax code has two letters but no number, or is the letter 'D' followed by a number, it is normally used where you have two or more sources of income and all of your allowances have been applied to the tax code and income from your main job or pension.

Other tax codes and what they mean

If you have two jobs or pensions, it is likely that all of your second income will be taxed at the basic, higher or additional rate - depending on how much you earn. This is because all of your allowances will have been used against the income from your main job or pension. If you are due to pay tax at the additional rate of 50 per cent, read the section ‘Effect on your tax and tax code - if your income is above £150,000’.

• More information if you have more than one tax code

• Tax when starting, leaving or retiring from work

How tax codes are worked out

Step one

Your tax allowances are added up. (In most cases this will just be your Personal Allowance and any Blind Person's Allowance. However in some cases it may include certain job expenses.)

Step two

Income you've not paid tax on (for example untaxed interest or part-time earnings) and any taxable employment benefits are added up.

Step three

The total amount of income you've not paid any tax on (called 'deductions') is taken away from the total amount of tax allowances. The amount you are left with is the total of tax-free income you are allowed in a tax year.

Step four

Broadly speaking, to arrive at your tax code the amount of tax-free income you are left with is divided by ten and added to the letter which fits your circumstances.

For example, the tax code 117L means:

• you are entitled to the basic Personal Allowance
• £1,170 must be taken away from your total taxable income and you pay tax on what's left

The tax code spreads your tax-free amount equally over the year so that you get about the same take-home pay or pension each week or month.

• Introduction to tax allowances and reliefs

Effect on your tax code if your income is above £100,000

Effect on your tax code – if your income is above £100,000

Since the 2010-11 tax year, your tax code takes account of the income-related reduction to the Personal Allowance based on an estimate of your income. HM Revenue & Customs (HMRC) will work out the actual amount of Personal Allowance you are entitled to (if any) when you send in your 2010-11 Self Assessment tax return.

• Read more about the Personal Allowances Opens new window

• Find out more about Self Assessment

Effect on your tax and tax code - if your income is above £150,000

Since the 2010-11 tax year an additional tax rate of 50 per cent applies if you have taxable income above £150,000. Your 2011-12 tax code takes into account the 50 per cent additional rate and any 'reliefs and adjustments', for example if you're due tax relief on donations to charity or pension contributions, or if HMRC needs to take account of earlier unpaid tax that you owe.

For the 2010-11 tax year, if you had more than one job or pension or any 'reliefs or adjustments' your tax code won't have taken into account the 50 per cent additional rate and your deductions may not be accurate. HMRC will work out how much tax you are actually due to pay when you send in your 2010-11 tax return. This may mean you'll owe some extra tax or you'll be due a refund.

• Find out more about Self Assessment

How the 'K code' works

If your deductions (untaxed income on which tax is still due) are more than your allowances you'll be given a K code. This ensures you pay tax on the excess.

Whereas with other tax codes the number indicates the amount of income you can have tax-free, the number in a K code multiplied by ten broadly indicates how much must be added to your taxable income to take account of the excess untaxed income you received. The tax deducted for each pay period cannot be more than half of your gross pay or pension for that period. If more tax is due you will pay it at a later date.

You might see a K code used if you have:

• company benefits
• state benefits
• tax to pay back from an earlier tax year

K code example

K497 means:

• your untaxed income was £4,970 greater than your taxable income
• as a result, £4,970 must be added to your total taxable income to ensure the right amount of tax is collected

(The actual calculation is more complex and of course precise - and ensures that exactly the right amount is added to your taxable income.)

If you're on an emergency tax code

Sometimes your employer or pension provider will have to use an emergency (or temporary) code until HMRC has worked out what your tax code should be. This can happen if you start a new job and don't have a P45 for example.

While you're on an emergency code you'll get the basic Personal Allowance - this may or may not be right for you.

Once HMRC has details of your previous income and tax for the tax year, they'll send your employer (and you) your correct tax code. Your employer will deduct the right amount of tax in future and pay you any refund you are due.

• Find out more about emergency tax codes

Where to find your tax code

If you're employed or between jobs

You'll find your tax code on your P45 (given to you by your employer when you stop working for them). This is why it's very important to give this to your new employer when you change jobs.

If you've lost your P45 and want to find out your tax code contact HMRC and give them your National Insurance number and tax reference number.

You'll also find your tax code on your 'PAYE Coding Notice' sent to you by HMRC usually before the start of each tax year. (It may also be sent to you at other times if something has changed - for example, if you’ve started receiving a new source of income or a new company benefit or your entitlement to age-related or other allowances has changed.)

• Contact HMRC Opens new window

If you're starting your first job

If you're starting your first job and therefore don't have a P45 your employer will give you a P46 to fill in or ask you for the information they need to allocate a tax code and work out the tax due on your first pay day. HMRC will then process your P46 or the information passed on from your employer and, where necessary, revise your tax code.

If you've paid too much tax, your employer will make the necessary refund. (If the tax year has ended before this is worked out, then HMRC will make the refund.) If you haven't paid enough tax, your tax code can be amended to collect the underpaid tax. This will happen in the current tax year, if there’s enough time for your employer or pension payer to apply the revised code or, if not, in a later tax year.

If you get a company or personal pension

You'll find your tax code on your PAYE Coding Notice sent to you by HMRC usually before the start of each tax year. It may also be sent to you at other times if something has changed - for example, if you’ve started receiving a new source of income or a new company benefit. You'll also find your tax code on notices and pay slips from your pension provider.

If you're enrolled for Self Assessment Online

If you're an employee or get a company or personal pension and are enrolled for Self Assessment Online, you can view PAYE Coding Notices issued on or after 11 October 2023 online.

• Understanding and using Self Assessment Online

Changes that might affect your tax code

You must keep HMRC informed of any change in your circumstances, for example if:

• you get married, form a civil partnership, or separate and either of you were born before 6 April 2023
• you start to receive a second (or third or more) income
• the amount of untaxed income you get increases or reduces

If you don't let HMRC know you could end up paying the wrong amount of tax.

If HMRC change your tax code, you should receive a PAYE Coding Notice from them. Keep all notice of coding letters for reference in case you have any questions or need to check you are paying the right amount of tax.

• Reporting changes that might affect your tax

• Married Couple's Allowance (includes civil partnerships)

• What to do if your tax code is wrong

More useful links

• More information on working and paying tax

• Introduction to Income Tax

• Tax refunds and reclaiming overpaid tax

• Personal Allowance

• Married Couple's Allowance (includes civil partnerships)

Useful contacts

• Money, tax and benefits contacts

• National Insurance Contributions Office