Do you know how to help your employees with queries about their tax code?
Understanding an employee’s tax code can be confusing for both the employee and employer. While it is ultimately the employee’s responsibility to ensure their tax code is correct, employers are often the first point of contact when questions arise.
Having a clear understanding of how tax codes work, what they mean, and how they impact pay can help you support your employees more effectively.
What is a tax code?
Every employee paid through a UK payroll is assigned a tax code by HMRC. This code tells employers how much Income Tax to deduct from an employee’s pay.
A tax code is made up of numbers and letters:
- Numbers indicate how much tax-free income (personal allowance) an employee is entitled to
- Letters reflect the employee’s personal circumstances
Personal Allowance (2026/27)
The standard personal allowance remains £12,570, represented by tax code 1257L.
Common Tax Codes:
| 1257L | Standard allowance |
| BR | Basic rate (20%) on all income |
| D0 | Higher rate (40%) |
| D1 | Additional rate (45%) |
| 0T | No allowance |
| NT | No tax |
Emergency Codes:
| M1/W1 | Non-cumulative tax |
Scottish/Welsh Codes:
| S1257L | Scotland |
| C1257L | Wales |
Starter Checklist and P45 Guidance
If a P45 is provided, use it. If not, complete a Starter Checklist to determine the correct code.
P9X and Employer Responsibilities
Apply HMRC P9X updates and do not manually change codes unless instructed.
When to Direct Employees to HMRC
Employees should contact HMRC if they believe their code is incorrect or their circumstances change.
Call to Action
If you’re unsure whether your payroll processes are handling tax codes correctly, or you’re receiving frequent queries from employees, now is a great time to review your approach.
Our payroll specialists can support you with:
- Applying HMRC tax codes accurately
- Managing starter processes and P45s
- Handling employee queries with confidence
- Ensuring compliance with the latest HMRC guidance
Get in touch with the Menzies payroll team today to see how we can help streamline your payroll and give you peace of mind.
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