HMRC issues letters with new tax codes to UK households – what they mean | Personal Finance | Finance

Some UK households may receive letters from HMRC in the coming days as new tax codes are rolled out for the 2025/26 financial year. As the new tax year begins, people may see changes to their tax code – particularly if their income, job status, or personal circumstances have shifted. However, for many, codes will remain the same.

The most common code for the year ahead is 1257L, which applies to most workers entitled to the standard Personal Allowance of £12,570 – the amount you can earn before paying income tax. This tax-free threshold remains unchanged from previous years. For employees paid through PAYE (Pay As You Earn), income tax kicks in once earnings exceed £242 per week or £1,048 per month.

Each tax code helps your employer or pension provider determine how much tax to deduct from your income. To understand how it works, simply multiply the numeric part of your code by 10.

For example, a 1257L code means you’re entitled to £12,570 in tax-free earnings. If you earn £27,000 a year, only £14,430 of that would be taxable.

Charity TaxAid urges individuals to check their tax codes carefully, especially if they have more than one job or receive income from employment and a pension. Errors can lead to overpaying or underpaying tax. It said: “Codes for the 2025/26 tax year, which began on April 6, are currently being issued. You should take action to review your tax code to ensure the tax deducted is accurate.”

If you’re unsure whether your tax code is correct, you can use HMRC’s online tax code checker or contact them directly for guidance.

What does my tax code mean?

Here’s what the most common letters mean:

• L – Entitled to the standard tax-free personal allowance.
• M – Marriage Allowance: You’ve received a transfer of 10% of your partner’s personal allowance (£1,260).
• N – Marriage Allowance: You’ve transferred 10% of your personal allowance to your partner.
• S – Your income or pension is taxed using the rates in Scotland.
• T – Your tax code includes other calculations, e.g., for income over £100,000.
• 0T – Your personal allowance has been used up, or HMRC doesn’t have enough information to give you a code.
• BR – All income is taxed at the basic rate (usually used if you have multiple jobs or pensions).
• D0 – All income is taxed at the higher rate.
• D1 – All income is taxed at the additional rate.
• NT – No tax is being paid on this income.
• K – You have additional income that isn’t being taxed elsewhere, and it exceeds your personal allowance.
• W1, M1, X – Emergency tax codes. These suggest you may need to update your details with HMRC.

The full list can be found here.

If your tax code is incorrect, you could be paying too much or too little tax. If you’ve overpaid, you can apply for a refund of the extra tax you’ve paid in the past four years. If you’ve underpaid, HMRC will usually allow you to repay the owed amount over 12 months – provided you owe less than £3,000.

To check your tax code, look at your payslip or log into your personal tax account via the HMRC app or website. You can also receive a tax code notice from HMRC by post. It’s your responsibility to notify HMRC if your tax code is wrong.