Decoding HMRC Tax Codes: A Comprehensive Guide to Their Meanings

HMRC uses various tax codes to indicate an individual’s tax status and allowances. The most common code is 1257L, representing the standard personal allowance. BR means all income is taxed at the basic rate, while D0 indicates all income is taxed at the higher rate. NT stands for ‘No Tax’ to be deducted.

K codes are used when deductions exceed allowances, such as K497. W1 and M1 are emergency codes used when HMRC lacks sufficient information. S prefixes apply to Scottish taxpayers, while C prefixes are for Welsh taxpayers.

0T is used when all personal allowances have been used or when a new employee hasn’t provided a P45. T codes indicate other calculations are needed to work out the tax-free amount. L is the default code for those entitled to the standard tax-free personal allowance.