New Tax Codes Issued By HMRC: What You Need To Know

HM Revenue and Customs (HMRC) has recently issued new tax codes for the 2025/26 tax year, prompting a warning for individuals not on the standard 1257L code. The agency emphasises the importance of reviewing tax codes to avoid potential fines for non-compliance.

Key Takeaways

• HMRC has introduced new tax codes for the 2025/26 tax year.

• The most common tax code is 1257L; those without it should check their codes.

• Emergency tax codes (W1, M1, X) may indicate incorrect tax deductions.

• Failure to comply with tax code regulations could result in fines.

Understanding Tax Codes

Tax codes are essential for determining how much tax is deducted from an individual's income. The most prevalent code, 1257L, allows for the standard tax-free personal allowance. Individuals not on this code are urged to understand their specific tax codes, as they can vary based on personal circumstances.

The following are some common tax codes:

• L: Entitled to the standard tax-free personal allowance.

• M: Marriage Allowance, where 10% of a partner's personal allowance is transferred.

• N: Indicates a transfer of personal allowance to a partner.

• S: Income or pension taxed at Scottish rates.

• T: Tax code includes other calculations, such as income over £100,000.

• 0T: Personal allowance has been exhausted or insufficient information is available.

Emergency Tax Codes Explained

HMRC has also issued warnings regarding emergency tax codes, which are temporary codes assigned when the agency lacks sufficient information about an individual's income. Common emergency codes include:

• W1: Used for weekly payments.

• M1: Used for monthly payments.

• X: Applied when payment frequency varies.

These codes can lead to incorrect tax deductions, and individuals are advised to update their details with HMRC promptly to avoid overpayment of taxes.

Importance Of Compliance

Failure to comply with the correct tax code can lead to significant financial repercussions, including fines. HMRC encourages individuals to take proactive steps to ensure their tax codes are accurate. This includes:

1. Reviewing your payslip for the correct tax code.

2. Providing your employer with a P45 from previous employment or completing a starter checklist if you do not have one.

3. Updating HMRC with any changes in circumstances, such as starting a new job or receiving company benefits.

Conclusion

As the new tax year begins, it is crucial for individuals to be aware of their tax codes and ensure compliance with HMRC regulations. By understanding the implications of their tax codes and taking necessary actions, taxpayers can avoid unnecessary fines and ensure accurate tax deductions. For further information, individuals can visit the HMRC website or consult with a tax professional.

Sources

• HMRC issues new tax codes to UK households with anyone not on 1257L warned, Birmingham Live.

• HMRC issues warning to anyone with three letters at start of tax code, Birmingham Live.