Understand PAYE tax codes

Guide summary

Use the tax code on the P45 if the new starter has one from their last job
Ask for a starter checklist if there is no P45 or they left their last job before 6 April 2025
Use 0T on a week 1/month 1 basis, starter declaration code C, if you cannot get a starter declaration
Update your payroll before the next payday when HMRC sends the right code to replace an emergency code
Do not carry the W1/M1 part of a code into the next tax year
Do not add or remove an S or C prefix yourself; use the code HMRC gives you
Tax you deduct in any pay period cannot be more than half of the employee's pay before tax
Keep a starter checklist for 3 years after the end of the tax year it relates to

You put each employee's tax code into your payroll software, and it works out the Income Tax to deduct from every payment. A code is a number followed by a letter, such as 1257L, sometimes with a prefix or a suffix.

How a code is built

Understanding PAYE tax codes

How to read and interpret PAYE tax codes for employees.

A PAYE tax code tells employers how much tax-free income an employee is entitled to before tax is deducted. It consists of numbers and letters that indicate the tax calculation method.

Standard code 2026/27: 1257L (£12,570 tax-free allowance)
Numbers meaning: Multiply by 10 to get annual tax-free amount (1257 = £12,570)
L suffix: Standard Personal Allowance applies
M suffix: Marriage Allowance - received 10% of partner's allowance
N suffix: Marriage Allowance - transferred 10% of allowance to partner
T suffix: Other calculations required (review needed)
0T code: No Personal Allowance - all earnings taxed
BR code: All income taxed at basic rate (20%) - no allowance
D0 code: All income taxed at higher rate (40%)
D1 code: All income taxed at additional rate (45%)
NT code: No tax to be deducted

Regional prefixes

S prefix: Scottish taxpayer (e.g., S1257L) - Scottish income tax rates apply
C prefix: Welsh taxpayer (e.g., C1257L) - Welsh income tax rates apply
No prefix: English or Northern Irish taxpayer - UK rates apply

Week 1/Month 1 basis (W1/M1)

If a code shows W1 or M1 (or X), tax is calculated on each pay period separately, not cumulatively. This prevents large refunds or bills when HMRC is still determining the correct code.

K codes

A K code (e.g., K475) means the employee has deductions greater than their allowance (e.g., company car benefit, unpaid tax from previous years). Tax is added to their pay for calculation purposes.

Tax codes explained (opens in a new tab)

Whatever the code, the tax you deduct in any pay period cannot be more than half of the employee's pay before tax.

Set the code for a new starter

If the employee gives you a P45 from their last job, use the tax code on it. If they have no P45, or left their last job before 6 April 2025, ask them to complete a starter checklist. Their answers give you a starter declaration, which sets the code.

Starter checklist statements (A, B, C)

Which tax code to use for a new employee who gives a starter checklist instead of a P45.

When a new employee does not have a recent P45, they complete a starter checklist (it replaced the P46). The statement they choose sets their starting tax code and starter declaration.

Statement A: First job since 6 April; no other job or pension; no Jobseeker's Allowance, Employment and Support Allowance or Incapacity Benefit since 6 April
Statement A tax code: Current personal allowance, cumulative (1257L in 2026/27)
Statement B: Had another job without a P45, or received Jobseeker's Allowance, Employment and Support Allowance or Incapacity Benefit, since 6 April
Statement B tax code: Current personal allowance on a week 1/month 1 basis (1257L W1/M1 in 2026/27)
Statement C: Has another job, or gets a State, workplace or private pension
Statement C tax code: BR: all pay taxed at the basic rate, no allowance
No declaration: 0T W1/M1, starter declaration code C

Student and postgraduate loans

The checklist asks which student loan plan the employee is on, and whether they have a postgraduate loan.
You can deduct only one plan type at a time, and a postgraduate loan alongside it.
If the employee selects more than one plan, start with the plan that has the lowest repayment threshold until HMRC sends a start notice (SL1).

If you cannot get a starter declaration

Use tax code 0T on a week 1/month 1 basis, with starter declaration code C.
0T gives no personal allowance, so all pay is taxed from the first pound.
If the employee gives you a checklist later, update the starter declaration in your payroll records and keep using the code from your first Full Payment Submission until HMRC sends a new one.

Records

A starter checklist is a PAYE record. Keep it for 3 years after the end of the tax year it relates to.

Download starter checklist (opens in a new tab)

Work out your new employee's tax code (opens in a new tab)

A P45 from the current tax year also carries a declaration: B, or C if its code includes BR, 0T, D0 or D1. Put the code and declaration on the FPS you send on or before the employee's first payday.

Replace emergency codes when HMRC sends the right one

Emergency tax codes

When an emergency tax code is used for a new employee, how it works and how it is replaced.

An emergency tax code works out tax on each pay period in isolation, because the employer does not have the details needed to work out the employee's code. It ends in W1 (weekly pay), M1 (monthly pay) or X (pay dates that vary).

Emergency code, starter statement B: 1257L W1/M1 (2026/27)
Emergency code, no starter declaration: 0T W1/M1
W1/M1 basis: Tax worked out on that week or month only
Payroll software wording: Some software shows NONCUM
Time for HMRC to update the code: Up to 35 days from the start date

When you use an emergency code

The employee has no P45 and chooses starter statement B: use 1257L on a week 1/month 1 basis, with starter declaration code B.
The employee has no P45 and you cannot get a starter declaration: use 0T on a week 1/month 1 basis, with starter declaration code C.
Starter statement A is not an emergency code: use 1257L on a cumulative basis.

How emergency tax works

Tax is worked out on what the employee is paid in that week or month only, not on the whole year.
The employee is taxed as if they were paid the same amount every week or month of the year, so they may pay the wrong amount of tax.
If the employee has not paid enough tax they stay on the emergency code until they have paid the correct tax for the year; if they have paid too much they can claim a refund from HMRC.

Replacing an emergency code

HMRC usually updates the code once it has details from the new and previous employers, and sends it to the employee and the employer.
Use the tax code HMRC sends you, including where the employee gives you a P45 or starter checklist after you have first paid them.
Do not carry the W1/M1 part of a code into the next tax year.

Emergency tax codes (employee guidance) (opens in a new tab)

Work out your new employee's tax code (opens in a new tab)

When the right code arrives, update your payroll before the next payday and add any previous pay and tax that comes with it, so tax is again worked out over the whole year.

Update codes when HMRC changes them

HMRC emails you when an employee's code changes. You can find the new code, sometimes called a P6, in PAYE Online under tax code notices, in the PAYE Desktop Viewer or in your payroll software. Update the employee's record before you next pay them.

Between January and March, HMRC tells you about codes for the tax year starting on 6 April. If a code is not changing, HMRC does not contact you and you carry it forward, leaving off any W1, M1 or X. A code that reaches you too late for the tax year applies in the next one.

Deal with employees' questions

A code changes when the employee's circumstances do: for example, when they start a second job or a pension, receive a taxable state benefit, claim Marriage Allowance, or have a company benefit added or removed. You cannot change a code yourself. If an employee thinks theirs is wrong, they should check and update their details with HMRC, which usually tells them and you the new code within 15 working days.

Scottish tax code indicator (S prefix)

How the S prefix on a tax code shows an employee pays Scottish Income Tax, and the 2026/27 Scottish rates.

An employee who pays Scottish Income Tax has a tax code that starts with S, for example S1257L. Employers deduct tax at the Scottish rates on wages, using the code HMRC sends.

Prefix: S (for example S1257L, SBR, S0T)
Who pays Scottish rates: People who live in Scotland, judged by main home
Who decides: HMRC, from the address on its records
Starter rate 2026/27: 19% on £12,571 to £16,537
Basic rate 2026/27: 20% on £16,538 to £29,526
Intermediate rate 2026/27: 21% on £29,527 to £43,662
Higher rate 2026/27: 42% on £43,663 to £75,000
Advanced rate 2026/27: 45% on £75,001 to £125,140
Top rate 2026/27: 48% over £125,140
Personal allowance: £12,570, the same as the rest of the UK
Second job or pension codes: SBR basic, SD0 intermediate, SD1 higher, SD2 advanced, SD3 top

What employers do

Use the tax code HMRC gives you; payroll software applies the Scottish tax table.
Do not add or remove the S prefix yourself.
If an employee moves to or from Scotland, they must tell HMRC their new address; the new rate is backdated to the start of the tax year (6 April) in which they moved.

Income Tax in Scotland (opens in a new tab)

Welsh tax code indicator (C prefix)

How the C prefix on a tax code shows an employee pays Welsh Income Tax, and the 2026/27 Welsh rates.

An employee who pays Welsh Income Tax has a tax code that starts with C, for example C1257L. The Welsh Government sets the Welsh rates, and for 2026/27 they are the same percentages as in the rest of the UK.

Prefix: C (for example C1257L, CBR, C0T)
Who pays Welsh rates: People who live in Wales, judged by main home
Basic rate 2026/27: 20% on £12,571 to £50,270
Higher rate 2026/27: 40% on £50,271 to £125,140
Additional rate 2026/27: 45% over £125,140
Personal allowance: £12,570
Second job or pension codes: CBR basic, CD0 higher, CD1 additional

What employers do

Use the tax code HMRC gives you; HMRC adds the C so the right rates apply.
If an employee moves to or from Wales, they must update their address with HMRC; the new rates are backdated to the start of the tax year in which they moved.

Income Tax in Wales (opens in a new tab)

Work out your new employee's tax code (opens in a new tab)

Legal basis

Primary legislation and key regulations

Government of Wales Act 2006 Primary 2006 · UK-wide Scotland Act 1998 Primary 1998 · UK-wide Wales Act 2017 Primary 2017 · UK-wide Scotland Act 2016 Primary 2016 · UK-wide The Income Tax (Pay As You Earn) Regulations 2003 SI 2003 · UK-wide

Browse UK legislation legislation.gov.uk

Official guidance

Tax codes (opens in a new tab)

GOV.UK

Tell HMRC about a new employee (opens in a new tab)

GOV.UK

Understanding your employees' tax codes (opens in a new tab)

GOV.UK

Understand PAYE tax codes

How a code is built

Set the code for a new starter

Replace emergency codes when HMRC sends the right one

Update codes when HMRC changes them

Deal with employees' questions

Legal basis

Official guidance

Related guides in Tax & Finance

Run payroll and submit RTI

Register as an employer (PAYE)

PAYE year-end tasks

Handle a new starter without a P45

Pay PAYE to HMRC