The complete list of HMRC tax codes and their definitions

We can learn important details about our current tax year's HMRC payments from our tax codes

Here's how to make sure you have the right code.

Even though you might not glance at your payslip first thing every month, the brief string of letters and numbers that make up your tax code is crucial to your financial situation.

Concerningly, a 2024 survey of 3,215 adults conducted by wealth manager Killik and Co. revealed that 32% of respondents had never looked up their tax code. In other words, they might be paying the tax collector more than is necessary.

Tax codes, which can be found on crucial documents like your paystub or pension statement, are essential because they provide precise information about the amount you pay the government.

On rare occasions, they may be in error, which could result in a sizable refund or a high tax bill from HMRC.

According to Rachael Griffin, a tax and financial planning specialist at Quilter, "you should make sure you are on the correct tax code to ensure you are not paying too much tax." "Get in touch with HMRC right away if you believe it to be incorrect.

"To maximize your personal allowance and lower dividend tax rate, it could also be helpful for business owners to review their salary and dividend balance.

It is therefore worthwhile to monitor your tax codes. Here's a comprehensive list that explains each code and what the various combinations mean.

What are tax codes?

Essentially, your tax code is a letter from HMRC to you, your employer, or your pension provider that details the amount of tax you must pay each month between April and March (i.e. E. throughout every fiscal year).

It always comes with a letter explaining your work status and may include numbers that indicate your tax band as well as your tax-free allowance and any eligible reliefs.

For example, your payslip is likely to show 1257L if you have one job or one pension. The 12,570 tax-free allowance you receive on your income tax is referred to here. Until April 2028, the standard personal allowance has been frozen.

You will not have a tax code if you work for yourself. You will be required to submit an annual self-assessment tax return instead.

Complete list of tax code letters and their meanings.

Naturally, your tax or employment situation might be a little more complicated. Here is a comprehensive list of the letters you will typically encounter, along with the information they provide regarding your tax status.

England and Northern Ireland's tax code letters.

BR: This indicates that all of the money earned from this employment or pension is subject to basic rate tax. It's typically utilized if you have a pension or a second job. D0: The higher rate is applied to all of your income from this job or pension. Once more, people with a second job are likely to see this on their paystubs. D1: If you have a second job or pension pot, all of your income from this job or pension is taxed at the higher rate. L: This indicates that you receive the standard personal allowance (12,570) that is free from income taxes. M-This letter certifies that, as part of the marriage allowance tax break, you have been credited with 10% of your partner's personal allowance. N-This letter indicates that your spouse has received a portion of your personal allowance as part of the marital allowance. NT: This letter demonstrates that you are not paying income tax on the money you receive, such as when all of your income is from capital gains. T: The computation of your personal allowance involves additional computations, as this letter displays. 0T: This code indicates that either your personal allowance has been depleted or that your new employer lacks the necessary information to provide you with an appropriate tax code. On your payslip, you might occasionally see a different letter. This is probably an emergency tax code. They are transient and typically only show up after you've started a new job, transitioned from self-employment to an employee position, or begun receiving state pensions or company benefits. The codes to watch out for are X, M1, or W1. Typically, they will adhere to the common 1257L code.

It is also possible that you will receive a code that starts with K. If your income exceeds your income tax-free personal allowance and is taxed differently, you will notice this. For instance, you might be receiving taxable benefits from the state or your employer, or you might be paying taxes that you owe from a prior fiscal year.

If you get a bonus or other one-time payment from your job, your tax code may change. If the one-time increase would push you over a certain threshold if it persisted for the remainder of the tax year, it could put you in a higher tax band because HMRC believes that any monthly increases indicate a permanent pay rise.

Since your tax-free allowance will begin to taper off, this is especially problematic if the bonus gives the impression that you will be earning over £100,000 annually. It's worthwhile to monitor your paystubs to prevent this result. Please contact HMRC right away if you see anything that is off.

Thousands of pensioners who take a sizable one-time withdrawal from their pension fund and HMRC assumes they will deduct that amount from their pension each month also face this problem. After being overtaxed on pension withdrawals, pensioners have recovered 1 point 37 billion since 2015. In the final three months of 2024, more than 14,600 repayment claims totaling nearly 50 million were processed.

Scotland's tax code letters.

The devolved UK nations have the ability to set income taxes differently. They therefore have codes that are distinct from those in England. This is how the Welsh and Scottish codes appear.

S: This letter demonstrates that Scottish tax rates are being applied to your income or pension. SBR: This code indicates that the Scottish basic rate (20 percent) is applied to all of your income from this employment or pension. All of your income from this job or pension is being taxed at Scotland's intermediate rate, which is 21%, according to SD0. SD1: All of your earnings from this employment or pension are subject to Scotland's higher rate of 42 percent taxation. SD2-This indicates that the advanced income tax rate of 45% in Scotland is applied to all of your earnings from this employment or pension. SD3: This indicates that all of your earnings from this employment or pension are subject to the highest tax rate in Scotland, which is 48%. Your personal allowance (12,570) has been used up, or your employer does not have all the information required to give you a tax code, according to the code S0T.

Wales tax code letters.

C-This letter indicates that Wales' tax rates, which are the same as those in England, are being applied to your income or pension. The Welsh basic rate (20 percent) is applied to all of your income from this job or pension, according to the CBR code. CD0: This indicates that all of your earnings from this employment or pension are subject to the higher rate of 40 percent taxation in Wales. CD1: This code indicates that all of your earnings from this employment or pension are subject to taxes at Wales' higher rate of 45 percent. If this appears, it indicates that either your personal allowance has been depleted or your employer does not have all the information required to give you a Welsh tax code.

If you believe your tax code is incorrect, what should you do?

You can get in touch with HMRC by phone or online if you believe your tax code is inaccurate.

By updating your employment details and informing HMRC of a change in income that may have affected your tax code, users can use the Check Your Income Tax online service.

After these updates, HMRC may alter your tax code.

Call 0300 200 3300 or, if you are not in the UK, +44 135 535 9022 to reach HMRC by phone.

Moreover, you can write to HMRC. In the United Kingdom, send your letter to HM Revenue and Customs, Pay As You Earn and Self Assessment, BX9 1AS.

A PAYE Coding Notice query form should be completed if you are required to notify HMRC of a change in someone else's income on their behalf (for example, as their accountant).