Tax Code Explained
Your tax code tells your employer how much tax-free income you are entitled to. The most common code is 1257L, meaning a Personal Allowance of £12,570.
What is a tax code?
A tax code is a combination of numbers and letters that HMRC assigns to every employee and pension recipient. Your employer uses it to work out how much Income Tax to deduct from your pay each period. The number part represents your tax-free allowance (multiply by 10 to get the figure), and the letter indicates your situation.
For 2025-26, the standard code is 1257L. The 1257 means £12,570 tax-free, and the L means you are entitled to the standard Personal Allowance.
How it works
HMRC sends your tax code to your employer via a coding notice. Common codes include:
| Code | Meaning |
|---|---|
| 1257L | Standard Personal Allowance of £12,570 |
| BR | All pay taxed at 20% (no allowance, often used for second jobs) |
| D0 | All pay taxed at 40% (higher rate) |
| D1 | All pay taxed at 45% (additional rate) |
| K | Deductions exceed your allowance (e.g. large company car benefit) |
| 0T | No tax-free allowance; pay taxed at every band. Used when your allowance is used up or your employer lacks your details |
| S1257L | Scottish taxpayer with standard allowance |
| C1257L | Welsh taxpayer with standard allowance |
| SBR / CBR | Scottish (S) or Welsh (C) version of BR: all pay taxed at the basic rate |
| SD0 / SD1 | Scottish codes: all pay taxed at the intermediate (SD0, 21%) or higher (SD1, 42%) rate |
| CD0 / CD1 | Welsh codes: all pay taxed at the higher (CD0, 40%) or additional (CD1, 45%) rate |
| 1100L | Legacy code from 2016-17 (£11,000 allowance). The current standard is 1257L (£12,570) |
The W1 or M1 suffix means "week 1" or "month 1" basis, indicating an emergency tax code with no cumulative calculation.
Real example
Rachel earns £45,000 and has a company car with a taxable benefit of £5,000. HMRC reduces her Personal Allowance by £5,000, giving her a tax-free amount of £7,570. Her tax code becomes 757L (757 x 10 = £7,570).
Without the company car, Rachel would be on 1257L and pay £6,486 in Income Tax. On 757L, she pays £7,486, which is £1,000 more. That extra £1,000 is the 20% basic rate tax on the £5,000 car benefit.
Who does this affect?
Every employee and pension recipient in the UK has a tax code. If you have more than one job, each job has its own tax code. Your main job usually gets the Personal Allowance (1257L) and any secondary employment is coded BR or D0. Self-employed individuals do not have a tax code because they pay tax through Self Assessment instead.
HMRC source
gov.uk/tax-codes lists all tax code letters and what each one means, plus how to check if your code is correct.
Tax code FAQ
What does the 1257L tax code mean?
1257L is the standard UK tax code for 2025-26. The 1257 means you get £12,570 of tax-free Personal Allowance, and the L means you qualify for the standard allowance. Income above £12,570 is then taxed at the normal rates.
What does the 0T tax code mean?
The 0T tax code means you get no tax-free Personal Allowance, so all of your pay is taxed at the basic, higher and additional rates as it crosses each threshold. It is used when your allowance has been used up by another job or when a new employer does not yet have your details (P45).
What does the BR (or CBR / SBR) tax code mean?
BR stands for Basic Rate: all income from that job or pension is taxed at 20% with no Personal Allowance, which is common for a second job. CBR is the Welsh version and SBR is the Scottish version of the same code.
What does the SD1 tax code mean?
SD1 is a Scottish tax code that taxes all of your income from that source at the Scottish higher rate of 42%, with no Personal Allowance. It usually applies to a second job or pension for a higher-rate Scottish taxpayer.
Is the 1100L tax code still used?
No. 1100L was the standard code for 2016-17, when the Personal Allowance was £11,000. The current standard code for 2025-26 is 1257L, reflecting the £12,570 allowance.
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