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Tax Code Information

Tax Code

SmartWork uses your tax code to calculate the PAYE Income Tax to deduct from each payslip. The standard tax code for the current (2026/27) financial year is 1257L.

Your tax code determines your annual tax-free gross pay. For instance, if your tax code is 1257L, you can earn £12,570 tax-free in the 2026/27 financial year.

It’s advisable to obtain your P45 from your most recent employer when you start new employment.

The two most common tax code formats are the following:

1. Cumulative

SmartWork will calculate your PAYE Income Tax based on your total earnings for the financial year. This ensures your tax is always up to date and helps identify any significant gaps in employment, which could result in a tax refund on your next payslip. Your payslips will display the tax code ‘1257L’ (or a different number if your annual tax-free allowance varies)

2. Week1Month1

SmartWork will only consider your weekly or monthly earnings when calculating PAYE Income Tax. It won’t know your total earnings for the financial year, and this tax code will not detect any potential tax refunds. Your payslips will display the tax code ‘1257L X’ (or a different number if your annual tax-free allowance varies).

Additionally, there are other tax codes to be aware of:

BR: This represents ‘Basic Rate’ and entails a flat 20% deduction of PAYE Income Tax from your taxable pay on each payslip.

D0: This represents ‘Higher Rate’ and involves a flat 40% deduction of PAYE Income Tax from your taxable pay on each payslip.

D1: This represents an ‘Additional Rate’ and includes a flat 45% PAYE Income Tax deduction from your taxable pay on each payslip.

0T indicates you have no tax-free allowance, and PAYE Income Tax deductions are at 20%. If your earnings are high enough, the deductions may increase to 40% or 45%.

K: This signifies that you have no tax-free allowance, and HMRC has used additional calculations to determine that you owe further tax. HMRC can provide more guidance on why.

HMRC may adjust your tax code during or at the end of the financial year if they anticipate that you will exceed certain thresholds.

Your tax-free allowance decreases by £1 for every £2 your adjusted taxable income exceeds £100,000. Your allowance will be zero if your taxable income reaches £125,000 or above (assuming the standard 1257L tax code).

Self-assessment Tax Returns

In some cases, such as when your income exceeds £100,000, you will need to submit a Self Assessment tax return. You can check the Government’s website here to see if you need to complete one. If you do not usually send a tax return, you must register by 5 October following the tax year you had the income.

Contact us if you need help with your self-assessment return; we’d be happy to help.

If you think your tax code may be incorrect

If you have any doubts about your tax code, it is advisable to contact HMRC directly. They can check their records, explain the rationale behind your tax code, and, if needed, send us an updated tax code electronically. Typically, we receive tax code updates within 7 days of HMRC notifying you of the change.

Here are the contact details you will require: Phone: 0300 200 3300; The SmartWork Employer Reference: 034/VA10818

Why your tax code might change

HMRC directly issues tax codes. If your employment situation changes or you have multiple income sources, HMRC may change your tax code. HMRC has the authority to update your tax code under the following circumstances:

  • If you start receiving income from an additional job or pension.
  • If your employer notifies HMRC about any changes in the benefits you receive from your job.
  • If you receive taxable state benefits.
  • If you claim Marriage Allowance.
  • If you claim expenses that are eligible for tax relief.

You may also be placed on an emergency tax code if you switch jobs. If you suspect that your tax code is incorrect, it is advisable to contact HMRC directly. They will issue any necessary updates to your code electronically. To get in touch with them, you can use the following contact details:

Phone: 03002003300, PAYE Ref: 034/VA10818

How can I check my tax code, or how much I have paid overall?

To check your tax code or total tax paid, the easiest option is to visit the HMRC website and use the Government Gateway. This online platform provides a comprehensive overview of your tax situation.

If you have multiple jobs or income from different sources, tracking your tax code and overall earnings can be challenging, especially if your tax code is non-cumulative. However, if you use the PAYE system, HMRC holds information on the tax you have paid, and the Government Gateway tax account lets you monitor it easily.

Using this service is typically faster than contacting HMRC directly. It provides details on your PAYE tax, year-to-date earnings, and National Insurance contributions. The portal also shows whether you owe any additional tax based on your deductions so far this year and your current tax code.

To access this service, you will need to set up a Gateway login if you haven’t done so already. You can easily create an account by visiting this link: https://www.access.service.gov.uk/login/signin/creds.

After you enter your preferred login details, you will receive a Gateway ID. It is crucial to keep this information secure, as you may require it to access your account in the future.

 

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