Whether you’re renting out property, running a beauty salon, or working in the creative industries, dealing with tax codes can feel like trying to crack a secret code of your own. From digital record-keeping to rapidly changing tax rules, it’s no surprise many professionals feel overwhelmed when it comes to their finances.
As more people choose self-employment and flexible income streams, it’s essential to know exactly how much tax you owe—and why.
Learning to interpret your tax code in plain English can give you the confidence to plan ahead, set aside the right amounts, and avoid unpleasant surprises. At Gorilla Accounting, our team specialises in supporting property investors, health and beauty professionals, and those working in entertainment and the arts. Combined with the power of FreeAgent and Xero, staying on top of your tax has never been simpler.
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Managing your tax affairs can be time-consuming and intricate. At BM & Co Accountants, we simplify the process, ensuring your finances are in expert hands while you focus on what’s important to you. Get in touch with us today, and experience peace of mind with our accounting and professional tax services.Get in Touch
What Is a Tax Code?
A tax code is a combination of numbers and letters issued by HMRC, showing how much Income Tax should be deducted from your earnings.
Even if you mainly work for yourself, tax codes matter. Perhaps you receive rent from property, occasional PAYE income from a TV contract, or part-time employment in a clinic or salon alongside your main business. Knowing how your tax code works ensures you’re paying the correct amount across all income sources.
Your tax code sets out how your Personal Allowance—the portion of your income you can earn before paying tax—is applied, plus any adjustments for unpaid tax or special circumstances.
Understanding what your tax code means is the first step to making sure you’re not overpaying or underpaying tax. Mistakes can lead to stressful backdated bills, penalties, and lost income.
Why Tax Codes Matter for Property Investors, Health & Beauty Professionals, and Creatives
If your income comes from more than one place—rental income, session work, royalties, part-time employment—your tax code becomes especially important.
For example:
- As a property investor, you may have PAYE income from employment plus rental profits.
- As a beauty professional, you might work part-time in a salon while running your own treatment room.
- As a creative or entertainer, you could be balancing freelance projects, royalties, and occasional contracts taxed under PAYE.
An incorrect tax code can mean you overpay tax or find yourself with a large bill you didn’t expect. When your livelihood depends on careful budgeting, the last thing you want is an HMRC shock.
The good news: if you’re on one of Gorilla’s fixed-fee accountancy packages, your dedicated accountant will help you review and update your tax codes to reflect your exact circumstances.
A Quick Guide to Common Tax Codes
Here’s a list of the most frequently used UK tax codes—use it as a reference whenever you receive a payslip, tax notification, or letter from HMRC:
1257L
The standard tax code for most people in the 2025/26 tax year. This allows the full Personal Allowance of £12,570 before Income Tax is deducted.
Who it usually applies to: Employees and pensioners without additional untaxed income.
BR (Basic Rate)
All income from this source is taxed at 20%. No Personal Allowance is applied.
Common for: Second jobs, pensions, or occasional PAYE engagements alongside self-employed work.
D0
Income taxed entirely at 40% (higher rate).
Who it applies to: High earners with more than one income source.
D1
Income taxed at the additional rate of 45%.
Who it applies to: People earning over £125,140 from a second income stream.
K Codes
Used when you have income not taxed elsewhere—such as collecting unpaid tax from previous years through PAYE. The K code increases your taxable income.
0T
No Personal Allowance is applied, so income is taxed at the relevant rate from pound one. Often used when HMRC doesn’t have all the details—such as when starting a new job or contract.
Note: This is often an emergency code.
NT
No tax deducted.
Who it applies to: Certain non-taxable income or specific exemptions.
L
Indicates you are entitled to the full Personal Allowance.
Who it applies to: Most taxpayers with straightforward tax affairs.
M
Shows you’ve received 10% of your spouse or civil partner’s Personal Allowance through the Marriage Allowance.
N
You have transferred 10% of your allowance to your spouse or civil partner.
T
Your Personal Allowance includes additional calculations.
Common if: You have more complex tax circumstances.
Scottish Tax Codes
If you live in Scotland, your tax codes start with ‘S’:
- S: Your income is taxed under Scottish rates.
- S0T: No Personal Allowance or incomplete tax information.
- SBR: Basic rate tax applied to all earnings from this job.
- SD0: Intermediate rate.
- SD1: Higher rate.
- SD2: Advanced rate.
- SD3: Top rate.
Welsh Tax Codes
For Welsh residents, your tax codes begin with ‘C’:
- C: Welsh tax rates applied.
- C0T: Personal Allowance used up or insufficient information.
- CBR: Basic rate applied.
- CD0: Higher rate applied.
- CD1: Additional rate applied.
What to Do if You Think Your Tax Code Is Wrong
HMRC can issue an incorrect tax code, particularly if your income changes during the year. If something doesn’t look right, it’s important to act quickly:
- Log into your Personal Tax Account on GOV.UK to review your tax code.
- Contact HMRC to query or update your details.
- Or simply ask us—we’ll review your tax code as part of your accounting package and help you get it corrected.