What is Tax Code?

A tax code is the set of numbers and letters HMRC issues to tell an employer or pension provider how much tax-free Personal Allowance an individual gets under PAYE. The standard code for 2024/25 is 1257L, meaning £12,570 of tax-free income. Letters carry meaning — e.g. BR taxes all income at basic rate, K codes add untaxed income, and an emergency code (W1/M1) is temporary. Wrong codes are a common cause of over- or under-payment of tax.