Tax Code 1257L Meaning
Understanding why HMRC has given you a 1257L tax code and what the numbers and letters mean is important because your tax code affects how much tax you pay.
The 1257L tax code is currently the most frequently used and basic tax code which is projected to be in effect until April 2028.
In Scotland the equivalent tax code is S1257L and in Wales it is C1257L.
HMRC uses your tax code to tell your employer how much tax to deduct from you and gives employed individuals a tax code for each source of income they have through PAYE.
Your personal allowance plays a big role in calculating your tax code and is something that you need to ensure is correct or your tax code will be wrong.
HMRC expects you to check your 1257L tax code for accuracy and to tell them if you think it needs to be altered.
What does the 1257L tax code mean?
The 1257L tax code reflects the tax free personal allowance of £12,570.
Your personal allowance is the amount you are allowed to earn before you pay income tax.
The numbers 1257 are given minus the zero because HMRC are giving you a £12,570 personal allowance.
The letter L added to the end to show that you are entitled to the standard personal allowance for that tax year.
HMRC can use other tax code letters for example the letter M means you are receiving the marriage tax allowance.
1257L tax code and your personal allowance
A tax code of 1257L gives you an allowance of £12,570 per annum before you start paying tax.
When you start earning over the personal allowance you will pay 20% tax on your taxable earnings up to a limit of £50,270.
The percentage of tax you pay then increases to 40% on earnings over £50,271 up to £125,140.
A top rate of tax called the additional rate is then introduced from £125,140 at 45%.
Checking your 1257L tax code
Tax code 1257L is a standard tax code and should be accurate for many employees under PAYE who have only one form of employment with no employment expenses, employer benefits or additional income.
Employees with employment expenses will normally have a higher tax code reducing the tax you pay.
If you have employer benefits like a company car your tax code would be lower than the standard code because you will pay more tax due to the benefit.
Be aware that your tax code also needs checked if you change employer or if you have other forms of income from a pension or a rental property for example.
What does 1257L M1 tax code mean?
Tax code 1257L M1 or 1257L W1 signifies that your tax code is non-cumulative.
This means tax owed for each pay period is calculated independently, ignoring any tax previously paid within the same tax year and disregarding the portion of your personal allowance already utilised.
A 1257L M1 tax code is an emergency tax code which is often used at the start of a new job if your employer doesn’t have your last P45 or a completed starter checklist.
Finding your current tax code
If you are not sure what your current tax code is you can check your most recent pay-slip or use your personal tax account.
The HMRC app is also a good place to find your tax code online and it gives you an explanation on how your tax code was calculated.
You might receive by post a P2 notice of coding from HMRC before the new tax year starts which explains the code that has been issued for the new tax year.
What to do if your tax code is wrong
The tax office or HMRC is the government department that manages tax codes and is who you will need to contact to make any alterations to your code.
Phoning HMRC isn’t always the quickest or easiest way to highlight and fix any coding errors or to question how your tax code has been created.
You can check your tax code online and follow the instructions on how to make amendments.
An early adjustment to your code is recommended because it limits the amount of incorrect income tax you will pay.
