UK workers could be at risk of not receiving the correct pay due to their tax code. Every wage-earning, tax-paying worker in the UK is assigned a unique code that determines their tax liability.
This code, typically a combination of letters and numbers, also indicates your annual tax-free income allowance. While there are several standard tax codes for most workers, three specific codes are issued in emergency situations.
If your payslip displays a tax code ending in W1, M1, or X, you’re on an emergency tax code. Generally, a W1 tax code applies if you’re paid weekly, an M1 code if you’re paid monthly, and an X code if your pay fluctuates.
Understanding each tax code
For instance, the « 1257L » code for the 2024/25 tax year represents a Personal Allowance of £12,570. Here’s a breakdown of some common tax codes and their meanings:
What to do if your tax code is incorrect
If you believe you’re not under the correct tax code, the first thing you should do is contact HMRC as you may have been paying the incorrect amount of tax. In some cases, you may actually owe HMRC money if you were paying less tax than you should have.
Depending on how much you owe, you may be able to set up a manageable repayment plan with the government body. Otherwise, you may find you’ve actually been overpaying on your tax.
In this case, you can claim a refund from HMRC through your online tax account. Further details on what your tax code means can be found here.
