Tax code 1257L is the most common tax code in England and Northern Ireland for the 2022/23 tax year, which started on 6th April 2022. Understanding your tax code is important as it helps determine how much tax you need to pay on your earnings.
In this article, we’ll discuss what tax code 1257L means, how much you will be taxed, what to do if you think it’s incorrect, and reasons why your code might not be 1257L.
What Does Tax Code 1257L Mean?
Nearly everyone in the UK is entitled to a tax-free personal allowance, which means that a certain amount of your earnings each year are paid to you without being taxed.
If your tax code is 1257L, it means your personal allowance is £12,570. This allowance is given to you in equal portions throughout the year, so that by the end of the tax year, you have received your full allowance.
For example, if you are paid weekly, your allowance is equivalent to £242 per week. If you’re paid monthly, it’s £1,048 per month.
1257L is a cumulative tax code, which means that if you return to work after a break or start working part-way through the tax year, your tax-free personal allowance will have been building up, and you may pay less tax for a while.
Understanding Tax Code 1257L
The personal allowance is the amount a UK taxpayer can earn tax-free. For the tax year 2022/23, the personal allowance increases to £12,570. HM Revenue and Customs (HMRC) convert the personal allowance of £12,570 into tax code 1257L. They drop the last digit, which gives 1257, and add the letter “L” if you are entitled to the standard personal allowance.
If you have a tax code 1257L, it means you can earn £12,570 before you pay tax.
How Much Tax Will You Pay with Tax Code 1257L?
With a tax code 1257L, your tax-free total is £12,570 per annum, which is spread over the course of the year.
Earnings in excess of this are taxed at 20% for earnings between £12,571 and £50,270. The rate then increases to 40% for earnings between £50,271 and £150,000, and earnings over £150,001 are taxed at the highest rate of 45%.
Note that Scotland has introduced its own tax rates, which are slightly different from the ones stated above.
Is Your Tax Code Incorrect?
Tax code 1257L will be correct for the majority of employees, typically those with just one employment with no benefits or tax-deductible allowances. However, the tax coding system can quickly go wrong due to changes such as:
- A change of jobs, having more than one job, starting, leaving, or retiring in the year
- Having more than one source of income, such as a job and a pension
- Changes to tax-deductible allowances, such as paying professional subscriptions or uniform laundry allowance
- Changes to taxable benefits, such as being provided with a company car for private use
Correcting Your Tax Code
If you believe your tax code may be incorrect, you should contact HMRC on 0300 200 3300 immediately. This will minimise the tax error. Other ways to contact HMRC about an incorrect tax code can be found on their website at gov.uk