Finding the key to your tax code

Your tax code denotes how much income tax you pay. It is calculated by HM Revenue and Customs (HMRC) and sent to your employer in code format. Your employer can then use the code to calculate how much income tax is due on your gross salary.

Your employer then pays the income tax due to HMRC (this is called the Pay As You Earn system or PAYE) and pay you the remainder – after other deductibles such as National Insurance and Student Loans.

The tax code is a number and a letter, with the number representing the tax allowances you are owed less anything that causes you to owe extra tax. Most UK taxpayers simply have their tax-free personal allowances and no other tax reliefs or expenses.

So, at its most basic the tax code is simply the personal allowance divided by ten followed by the letter ‘L’. The personal allowance has been set at £12,570 until 6 April 2028, so most people will have a tax code of 1257L (if you are in Scotland you may see an ‘S’ in front of this and in Wales a ‘C’).

This number may be higher if you have other allowances that reduce your tax bill – HMRC may use your tax code to give you tax relief every month on your professional expenses once you have made your first claim for them [link to expenses article]. Or you may make regular charitable donations which qualify for tax relief. The number may be lower if there are things that cause extra tax to be due, for example if you have any taxable benefits provided by your employer (unlikely for doctors), or if you owe income tax to HMRC.

Your tax code can be found on any payslip, P60 or P45 – why not check what it is on your last payslip if you’re not sure?

Check your payslip, know your code

Unfortunately, the PAYE system is complicated and it is very common for doctors to end up with the wrong tax code. Moreover, as doctors switch to different trusts, for example when going from FY1 to FY2, two payslips may be received in the same month and this can confuse HMRC into thinking you have two jobs. This may cause them to put you on an emergency tax code. These are often (with S or C in front if in Scotland or Wales):

• 0T – HMRC are disallowing your tax-free personal allowance then applying the relevant tax rates (20% then 40% then 45% as appropriate or the equivalent Scottish rates)
• D0 – HMRC are disallowing your tax-free personal allowance and taxing everything at 40%
• BR – HMRC are disallowing your tax-free personal allowance and taxing everything at 20%

There are other emergency tax codes (eg D1 means no personal allowance and tax at 45% or SD1 where the personal allowance is removed and the Scottish higher rate of 42% is applied)

Definitely check your main payslip for these codes – if you see one it is likely you are overpaying income tax (or in the case of a BR tax code you may be underpaying).

Note that these may be correct in some circumstances. If your main job has a normal tax code but you locum and those payslips have a D0 tax code then this might be right – you get your personal allowance allocated against your main income and then pay a pure 40% income tax on your locum income which is appropriate. But for the main part you should not be seeing an emergency tax code on your main salary.

Of course, given that PAYE is complicated, your tax code may not be an emergency code but still be wrong – for example you may have cancelled a subscription or you may start to make a regular charitable donation etc.

Changing code through a personal account

At Medics Money we recommend that every doctor sets up a ‘Personal Tax Account’ with HMRC. This will show you what information HMRC has regarding your employment and tax position and also what makes up your tax code. Moreover, if your tax code is incorrect then you can use your Personal Tax Account to change it. More information on how to do this is available here.