New tax codes issued in January – make sure yours is right

Tax codes for the coming tax year will begin to be sent out to taxpayers from January, but you will need to make sure the code you’ve been given is correct for your situation. HMRC does make mistakes, but if you resolve them before you begin the new tax year on April 6, you might save yourself some hassle. If you pay your tax under the Pay As You Earn (PAYE) system, then you will be given a new tax code which will apply for the coming tax year. But if your earnings have changed, or you now have a company car, for example, or you no longer receive Benefits in Kind, it is especially important to make sure your tax code is correct. If you don’t, you may find you’re paying more in tax than you need to, and you would then need to reclaim that tax back. Or worse, you could find you aren’t paying enough in tax, and then have to pay more later to catch up. So, checking your code as soon as you get it could mean you save yourself some trouble, and keep the right amount of money in your own pocket.

What should I expect to see?

The most common tax code in the 2025/26 tax year is 1257L, which is used for most people with one job and no income that is untaxed, or any taxable benefits such as a company car, said HMRC. As the personal allowance has remained at £12,570 for the 2026/27 tax year, this is likely to remain the most common tax code, as this number relates to the amount of personal allowance you have. If the number is different to this, you usually multiply it by 10 to find your actual personal allowance. Also, if this code is followed by W1, M1, or X, then it is an emergency tax code, which is typically used if a new employee doesn’t have a P45. If this is the case, then the sooner you address this and get the correct tax code, the better it is for you. Any tax codes that begin with the letter K denote deductions from wages for company benefits, state pension, or tax owed from previous years that are higher than the personal allowance. For example: An employee with tax code K475 and a salary of £27,000 has taxable income of £31,750 (£27,000 plus £4,750). The tax deduction for each pay period cannot be more than half an employee’s pre-tax pay or pension. Source: Gov.uk

What if things change within the tax year?

The most likely reason for a change in your tax code within the tax year, is if your personal allowance or something else related to your Benefits in Kind changes. This might be a previous benefit that has been withdrawn by the company, such as a company car no longer being included as part of your job. Your company will typically receive an alert if your tax code changes during the tax year, and your tax code should be updated before you receive your next paycheque. So, keep an eye on your tax code throughout the year as well in case it changes. Again, there could easily be a mistake made.

We can help you meet your obligations

If you are unsure about your tax code, or whether you have had the correct amount of personal allowance allocated to you, then please get in touch and we would be happy to give you the guidance you need.