Understanding your employees' tax codes
Overview
You put an employee鈥檚 tax code into your payroll software to work out how much tax to deduct from their pay throughout the year.
This guide is also available in Welsh (Cymraeg).
There鈥檚 a separate guide on tax codes if you鈥檙e an employee.
What you need to do
When you take on a new employee, you normally work out their tax code by using their P45. The code will usually be made up of several numbers and one letter, such as 1257L.
You usually need to update your employee鈥檚 tax code at the start of a new tax year. If the tax code changes during the year, HM Revenue and Customs (HMRC) will email you - you should update your payroll records as soon as possible.
Tax code 1257L
The most common tax code for tax year 2024 to 2025 is 1257L. It鈥檚 used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).
1257L is an emergency tax code only if followed by 鈥榃1鈥�, 鈥楳1鈥� or 鈥榅鈥�. Emergency codes can be used if a new employee does not have a P45.