HMRC have shared four possible reasons your tax code for the 2025/26 financial year may change.
As a new financial year begins on April 6, both workers and retirees face a fresh wave of adjustments. HM Revenue and Customs (HMRC) has been issuing emails to taxpayers, nudging them to verify the details of their newly-minted tax code for 2025/26.
This crucial number informs your employer or pension provider exactly how much tax should be sliced from your income. For most with a single job or pension, the common tax code you’ll see is 1257L.
The UK Government declared a freeze on the Personal Allowance at £12,570 until the start of the 2028/29 fiscal year – this has been frozen at this rate since the 2021/22 financial year.
HMRC’s email clarifies that from April, tax codes will get a shuffle for four potential reasons, reports the Daily Record. The note reads: “Your PAYE Income Tax records have recently changed, which means the amount of tax you pay will change.”
For security reasons, HMRC does not give the full details in the email and urges people to log into their online HMRC account.
Four reasons for a tax code change for 2025/26
- your job changed
- your pay changed
- your company benefits, such as a company car changed
- your pension changed
Checking your tax code
A quick glance at your payslip should tell you what you need to know. Once you’ve taken note of your Personal Allowance tax code, you can head to the GOV.UK website and use the online “Check your Income Tax for the current year” service – a handy digital tool for staying in the know.
The handy new online tool lets you assess your tax code and Personal Allowance for the current tax year, helping you to determine any changes in your tax code. Additionally, it gives users the ability to get an estimate of their total tax payment for the entire year.
However, the service cannot be used by self-employed workers. The GOV.UK website explains: “You cannot use this service if Self Assessment is the only way you pay Income Tax.”
What the tax code numbers mean
Understanding your tax code numbers is essential; they indicate how much of your income is tax-free within the tax year, known as your Personal Allowance. Generally, you can calculate your total tax-free earnings by multiplying the number in your tax code by 10.
For example, an employee with the tax code 1257L can earn £12,570 before being taxed. If they earn £30,000 per year, taxable income is £17,430 (£30,000 – £12,570).
What the letters mean
The letters embedded within your tax code are also telling, as they reflect your particular circumstances and the impact on your Personal Allowance. You can decode the various tax code letters and their implications by visiting the UK.Gov website here.
Here’s a quick breakdown of some of the most frequently encountered tax code letters:.
L – For an employee entitled to the standard tax-free Personal Allowance
S – Applied when your primary residence is in Scotland
BR/SBR – Used for additional work or pensions
M – For an employee whose spouse or civil partner has transferred some of their Personal Allowance
N – This is for an employee who has transferred some of their Personal Allowance to their spouse or civil partner.
T – This is used when HMRC needs to review some items with the employee.
If your tax code ends with ‘W1’, ‘M1’ or ‘X’
W1 (week 1) and M1 (month 1) are emergency tax codes that appear at the end of an employee’s tax code, such as ‘577L W1’, ‘577L M1’ or ‘577L X’.
If your tax code starts with a ‘K’
Tax codes beginning with ‘K’ indicate you have income not being taxed in another way and it’s worth more than your tax-free allowance.
This typically occurs when you’re:
- paying tax you owe from a previous year through your wages or pension
- getting benefits you need to pay tax on – these can be state benefits or company benefits
Your employer or pension provider deducts the tax due on the income that hasn’t been taxed from your wages or pension – even if another organisation is paying the untaxed income to you.
