Why Has My Tax Code Changed?

Your tax code may change due to income, benefits, or HMRC updates. Learn why it changed, how to fix errors, and upcoming 2025 tax code changes.

If your tax code has changed, you may be wondering why and whether it’s correct. Tax codes are updated by HMRC based on your income, job changes, company benefits, or tax adjustments. A wrong tax code could mean overpaying or underpaying tax, so it’s important to check.

This guide explains what your tax code means, why it changes, how to fix errors, and the most common tax codes.

What Does My Tax Code Mean?

Your tax code tells your employer or pension provider how much Income Tax to deduct from your pay.

A standard tax code, such as 1257L, means:

  • "1257" – You have a £12,570 personal allowance (tax-free income).

  • "L" – Standard tax code for most employees.

If your tax code includes other letters, it may indicate additional adjustments.

Common UK Tax Codes & What They Mean

Tax Code 1257L: Standard personal allowance (£12,570 tax-free)

Tax Code BR: All income taxed at 20% (usually for second jobs)

Tax Code D0: All income taxed at 40%

Tax Code D1: All income taxed at 45%

Tax Code 0T: No personal allowance applied (full income taxed)

Tax Code K500: Negative personal allowance (due to unpaid tax or benefits)

Tax Code 1257L W1/M1: Emergency tax code (taxed on a per-pay-period basis)

Why Has My Tax Code Changed?

Your tax code can change if HMRC adjusts your tax-free allowance or applies deductions.

Common Reasons for Tax Code Changes

  1. Job Change – If you switch jobs, HMRC may apply an emergency tax code until they have full income details.

  2. Second Job or Pension – If you have multiple income sources, your second job may be taxed at BR, D0, or D1.

  3. Company Benefits (e.g., Car, Medical Insurance) – Perks from your employer reduce your tax-free allowance, leading to a lower tax code.

  4. Unpaid Tax from Previous Years – HMRC may adjust your tax code to recover unpaid tax.

  5. State Pension or Benefits – If you receive a state pension, it is taxable but not taxed at source, so HMRC may reduce your allowance.

  6. Marriage Allowance – If your spouse transfers part of their allowance to you, your tax code may include "M" or "N".

  7. Income Over £100,000 – If your earnings exceed £100,000, your personal allowance is gradually reduced (£1 lost for every £2 earned over £100,000).

  8. HMRC Error or System Update – Sometimes, tax codes change due to system updates or incorrect data.

Example of a Tax Code Change

  • Before: 1257L (full personal allowance).

  • After: 1187L (personal allowance reduced due to company benefits).

If HMRC adjusts your tax code incorrectly, you could end up paying too much tax.

How Can I Change My Tax Code?

If you think your tax code is wrong, take these steps:

  1. Check Your Tax Code

    • Look at your payslip or P60.

    • Log in to your HMRC Personal Tax Account (https://www.gov.uk/check-income-tax).

  2. Contact HMRC

    • Call HMRC at 0300 200 3300.

    • Explain why you think your tax code is incorrect.

  3. Update Employer or Pension Provider

    • If you started a new job, provide your P45.

    • If you don’t have a P45, complete a Starter Checklist (formerly P46).

  4. Wait for HMRC to Issue a New Code

    • Once HMRC updates your tax code, your employer will apply it automatically.

    • If you overpaid tax, you will be refunded via payroll or a tax rebate.

What If My Tax Code Is Wrong?

If your tax code is incorrect and not fixed, you could:

  • Overpay tax – You may be eligible for a refund.

  • Underpay tax – HMRC will ask you to repay the missing tax later.

Can My Personal Allowance Be Negative?

Yes. If you have unpaid tax, company benefits, or tax debts, HMRC may issue a K tax code (e.g., K500).

  • This means an extra £5,000 is added to your taxable income.

  • It results in higher tax deductions from your salary.

Changes to HMRC Tax Codes in 2025

For 2025/26, no major tax code changes have been announced yet. However:

  • The personal allowance (£12,570) is frozen until at least 2028.

  • More people will move into higher tax brackets due to wage increases.

  • HMRC may update tax codes in April 2025 based on income changes.

Future Tax Code Adjustments to Watch For

  • Pension changes – If state pension rates increase, some pensioners may see tax code adjustments.

  • Self-employed tax code shifts – Changes to Making Tax Digital (MTD) may affect tax codes for some self-employed individuals.

Why Are Tax Codes Needed?

Tax codes ensure that:

  • You receive the correct tax-free personal allowance.

  • Employers deduct the right amount of tax.

  • HMRC collects unpaid tax through PAYE (if necessary).

Without tax codes, PAYE workers would need to file a tax return every year.

Most Common Tax Code Scenarios

SituationLikely Tax CodeWhat It Means

Standard job, no extra income: 1257L Full personal allowance applied

Second job, BR or D0 No allowance, all income taxed at 20% or 40%

New job, no P45, 0T or emergency code No personal allowance applied

Company car or benefits, Lower tax code (e.g., 1100L) Personal allowance reduced

Earning over £100,000, Adjusted tax code Personal allowance reduced

Final Thoughts

Your tax code can change for many reasons, including job changes, multiple incomes, benefits, or HMRC updates. If you believe your tax code is wrong, check your payslip, log in to HMRC, or call them directly to correct it.

If you’ve overpaid tax, HMRC may issue a refund automatically, but you can also apply for a tax rebate manually. Always check your tax code when starting a new job or receiving a benefits adjustment to avoid unexpected tax bills.