Understanding Your Tax Code for 2025/26 | Trueman Brown

Understanding your tax code and why it matters

Your tax code, issued by HM Revenue & Customs, determines how much tax is deducted from your earnings via PAYE.

It reflects how much tax-free allowance you are entitled to and ensures you pay the correct amount of income tax through your employer or pension provider.

Getting your code right is key to avoiding under- or over-payment of tax.

In the 2025/26 tax year, the standard personal allowance stays at £12,570, and the most common code is 1257L.

This article will guide you through: what a tax code is, how it’s calculated, what changes for 2025/26 you should watch for, how to check and correct your code, and how our local accountancy firm can help.

What is a tax code and how is it constructed?

Your tax code is made up of letters and numbers. The number part (for example 1257 in “1257L”) represents the amount of your personal allowance divided by ten: e.g., £12,570 becomes 1257. The letter signals your circumstances.

Here are some of the letter suffixes you’ll see in your tax code:

  • L – you’re entitled to the standard personal allowance (e.g., 1257L)

  • M / N – transfer of 10% of allowance under Marriage Allowance

  • BR, D0, D1 – you’re taxed at the basic, higher or additional rate with no personal allowance via that job

  • K – your allowance is negative (you owe tax from earlier years)

  • S or C prefix – you pay Scottish (S) or Welsh (C) income tax rates

Infographic explaining the meaning of UK tax code letters including L, M, N, T, BR, D0, D1, and K — created by Trueman Brown Accountants.

How is your code used in payroll and PAYE?

When your employer or pension provider runs PAYE, they apply your code.

The code tells them how much tax-free income you’re allowed before tax is deducted.

If your code is 1257L for 2025/26, you can earn £12,570 tax-free.

Any income above your allowance is taxed according to the relevant rates: for 2025/26 these remain at 20% (basic), 40% (higher) and 45% (additional).

If your code is incorrect, you may either under-pay tax (leading to a bill later) or over-pay (locking up money that could be in your pocket now).

That’s why it’s important to review your tax code regularly.

Key changes for 2025/26 you should know about your tax code

Here are the main changes relevant to your tax code in the 2025/26 tax year:

  • The standard personal allowance is still £12,570 (so the standard code remains 1257L).

  • The higher rate threshold remains at £50,270 (income above this pays 40%) and the additional rate applies above £125,140.

  • Emergency tax code from 6 April 2025 is 1257L with W1/M1/X (weekly/monthly) for new starters/unchecked cases.

  • Employers must treat payments around the tax year boundary carefully: e.g., if payday falls after 6 April 2025, for PAYE purposes the payment may still be treated as before.

  • HMRC emphasises reviewing your tax code, especially if you have more than one job/pension, receive state benefits, or there were underpayments last year.

Common reasons for an unexpected tax code

You might find your tax code looks different from 1257L even if you expected it.

Here are typical reasons:

  • You have more than one job or pension – your allowance may be split, or you may be on BR for the second job.

  • You received taxable benefits (state pension, Jobseeker’s Allowance, etc) and HMRC adjust your code.

  • You owe tax from a previous tax year — a K prefix may appear.

  • You started or left a job mid-year, or had multiple employers in a tax year — the code may be non-cumulative or emergency.

  • You moved into Scotland or Wales — the prefix may change to S or C, affecting your code.

How to check and correct your tax code

Follow these steps to check and, if necessary, correct your tax code:

  1. Log into your HMRC Personal Tax Account online – your current tax code will be visible.

  2. Compare your code with what you expect (for most people: 1257L for 2025/26).

  3. Examine your payslip – check the tax code used, the tax deducted, and that it aligns with your earning and allowance status.

  4. If the code seems wrong (e.g., you’re on an emergency code when you shouldn’t be), contact HMRC to investigate.

  5. If you have multiple employments/pensions, ensure your allowance has been allocated appropriately across them.

  6. Keep any correspondence from HMRC and your pay/pension records in case you need to correct an error later.

​How we can help you with your tax code

If you’re unsure about your tax code, worried it may be wrong, or you have complex circumstances (multiple jobs, pension income, state benefits, etc), then Trueman Brown can assist.

We’re a local firm of chartered accountants who specialise in personal tax, PAYE issues, and ensuring that your code is accurate and optimal.

You can get in touch with us at:

We’ll review your tax code, advise on any adjustments needed, liaise with HMRC where required, and help ensure you’re not over-paying tax or facing unexpected tax bills due to an incorrect code.

Frequently Asked Questions (FAQ)

Q: What is the standard tax code for 2025/26?
A: For most employees the standard tax code is 1257L, reflecting the personal allowance of £12,570.

Q: I’ve been put on BR tax code at my second job — is that correct?
A: Yes, it can be correct. If you have two employments, your personal allowance may be allocated to your main job and the second job may use code BR (tax at 20% on all income from that job) so your allowance isn’t double-used.

Q: What if my tax code has a K prefix?
A: A K prefix means HMRC has determined you have taxable income (or previous under-paid tax) that exceeds your personal allowance. Your allowance is effectively negative, so tax is collected accordingly.

Q: My tax code changed mid-year — do I need to do anything?
A: It depends. HMRC may update your code if your circumstances change (new job, pension, benefits etc). Check your Personal Tax Account and your payslip. If it seems wrong, contact HMRC or speak to us.

Q: I earn over £100,000 — how does that affect my tax code?
A: If your income is above £100,000 the personal allowance starts to be withdrawn by £1 for every £2 of income above £100,000. If you hit £125,140 your allowance goes to zero. Your tax code will reflect that (perhaps a 0T or similar).

If you’d like to arrange a review of your tax code or need help navigating these changes for 2025/26, drop us a line at mark@truemanbrown.co.uk or call 01708 397262 — we’re here to help.

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