Full list of HMRC tax codes and what they mean

UK tax codes: A tax bill surrounded by UK pounds and notes (image: Getty Images)

UK tax codes often look complicated, but are simpler in reality (image: Getty Images)

(Image credit: Getty Images)

last updated 17 September 2024

Tax codes are hardly the most interesting topic of conversation. But the short combinations of letters and numbers are key to your finances.

Worryingly, a recent poll of 3,215 adults that was run by Censuswide on behalf of Killik & Co found almost a third (32%) of people had never checked their tax code. It means they could be paying more to the taxman than they should be.

Found on important documents, such as your payslip or pension statement, tax codes are vital because they tell you exactly what you’re paying to HM Treasury. Very occasionally, they can be wrong, which could leave you with either a big rebate or a hefty tax bill from HMRC.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

So, it's worth keeping tabs on your tax codes. But what do the different combinations mean? Here’s a full list, with each code explained.

What are tax codes?

Your tax code is basically a note from HMRC to you and your employer or pension provider that explains how much tax you’re due to pay on a monthly basis between April and March (i.e. the financial year).

It always comes with a letter that describes your employment status and may have numbers, which usually reflect your tax-free allowance and any reliefs you're eligible for, but can also refer to your tax band.

For example, if you have one job or one pension, you’re likely to see ‘1257L’ on your payslip. This refers to the £12,570 tax-free allowance you get on your income tax.

If you're self-employed, you will not have a tax code. Instead, you will have to file a self-assessment tax return once a year.

Tax code letters explained

Of course, your employment or tax status may be a little more complicated. So, here is a full list of the letters you’ll normally see - and what they tell you about your tax status:

BR - It means all of the income from this job or pension is taxed at the basic rate. It’s usually used if you’ve got a second job or a pension.
D0 - All of your income from this job or pension is taxed at the higher rate. Again, this is most likely to appear on the payslips of those with a second job.
D1 - All of your income from this job or pension is taxed at the additional rate (if you’ve got a second job or pension pot).
L - This means you are getting the standard income tax-free personal allowance (£12,570).
M - This letter shows you’ve received a transfer of 10% of your partner’s personal allowance, as part of the Marriage Allowance tax break.
N - This letter means some of your personal allowance has been passed over to your partner as part of Marriage Allowance.
NT - This letter shows you are not paying any income tax on the money you’re getting (for example, if all of your income comes via capital gains).
T - This letter shows that other calculations are included in working out your personal allowance.
0T - This code means your personal allowance has been used up, or that your new employer doesn’t have all of the details they need to give you a proper tax code.

Sometimes, you may see a different letter on your payslip. This is most likely to be an emergency tax code. These are temporary and usually only appear when you’ve: started a new job, become an employee after having been self-employed, started receiving company benefits or a state pension. The codes to look out for are: W1, M1 or X. They will normally follow the standard 1257L code.

Another possibility is that you’ll get a code beginning with ‘K’. You’ll see this if you’ve got an income that’s not being taxed in a different way and exceeds your income tax-free personal allowance. For example, you may be paying tax you owe from a previous financial year, or receiving taxable benefits from your company or the state.

Your tax code could change if you receive a bonus or another form of one-off payment from your job. Given HMRC assumes any monthly increases signify a permanent pay rise, it may put you in a higher tax band (assuming the one-off rise would push you above a particular threshold if it continued for the rest of the tax year).

This is a particularly big issue if the bonus makes it look like you'll be earning more than £100,000 a year, as your tax-free allowance will start to taper off. To avoid this outcome, it's worth keeping an eye on your payslips. If you spot anything that's incorrect, get in touch with HMRC immediately.

What if I live in Scotland or Wales?

Income tax can be set differently by the devolved UK nations. As such, they have different codes to those you get in England. Here’s what the Scottish and Welsh codes look like:

Scotland

S - This letter shows your income or pension is being taxed using Scottish rates.
SBR - This code means all of your income from this job or pension is being taxed at the Scottish basic rate (20%).
SD0 - This code tells you that all of your income from this job or pension is being taxed at the intermediate rate in Scotland (21%).
SD1 - This code means all of your income from this job or pension is taxed at Scotland’s higher rate (42%).
SD2 - This shows that all of your income from this job or pension is being taxed at the top income tax rate in Scotland (45%).
S0T - This code means your personal allowance (£12,570) has been used up, or that your employer doesn’t have all of the details they need to provide you with a tax code.

Wales

C - This letter means your income or pension is being taxed using the rates in Wales (which are the same as they are in England).
CBR - This code shows all of your income from this job or pension is getting taxed at the Welsh basic rate (20%).
CD0 - This shows you that all of your income from this job or pension is being taxed at the higher rate for Wales (40%).
CD1 - This code means that all of your income from this job or pension is taxed at the additional rate in Wales (45%).
C0T - If you see this, it means your personal allowance has been used up, or your employer doesn’t have all of the details they need to provide you with a Welsh tax code.

Will income tax change in the Budget?

Tax bands and the personal allowance have been frozen since April 2021. Given wages and benefits have risen significantly (in numerical terms) during this period, it’s highly likely that millions more people are now either earning more than the personal allowance, or have been dragged into a higher tax band.

Labour has promised no hikes to working taxes will be coming in Chancellor Rachel Reeves's Budget. So, it seems fresh income tax hikes will not be on the way - although frozen thresholds will mean they will effectively go up for thousands of workers over the coming year.

An increase to Capital Gains Tax (CGT) is on the cards, which could have a bearing on your tax code. MoneyWeek will update this page with the latest news as soon as it becomes available.

Henry Sandercock has spent more than eight years as a journalist covering a wide variety of beats. Having studied for an MA in journalism at the University of Kent, he started his career in the garden of England as a reporter for local TV channel KMTV.

Henry then worked at the BBC for three years as a radio producer - mostly on BBC Radio 2 with Jeremy Vine, but also on major BBC Radio 4 programmes like The World at One, PM and Broadcasting House. Switching to print media, he covered fresh foods for respected magazine The Grocer for two years.

After moving to NationalWorld.com - a national news site run by the publisher of The Scotsman and Yorkshire Post - Henry began reporting on the cost of living crisis, becoming the title’s money editor in early 2023. He covered everything from the energy crisis to scams, and inflation. You will now find him writing for MoneyWeek. Away from work, Henry lives in Edinburgh with his partner and their whippet Whisper.