Changes in Tax Codes & Allowances for 2025/26

As the new tax year begins, it’s important to keep an eye on any updates to tax codes and allowances as they can have a direct impact on your take-home pay. Each year, HMRC might introduce new tax codes or update the existing ones to reflect changes in personal allowances, income tax bands, or your unique situation.

Getting a grip on how these tax codes work and knowing what allowances you qualify for can help you avoid any unexpected surprises on your payslip and make sure you’re paying the right amount of tax.

No matter if you're employed, self employed, sole trader, limited company director or a retired individual, understanding your tax code and the allowances available to you is key to keeping your finances in check. In this guide, we’ll break down the changes in tax codes and allowances for 2025/26, clarify what they mean for you, and point out any actions you might need to take.

A tax code is essentially a mix of numbers and letters that HMRC uses to tell your employer or pension provider about how much income tax to deduct from your salary or pension. It indicates how much of your earnings are tax-free and how much is subject to tax.

The Standard Tax Code

Most people in the UK have the standard tax code, which usually changes when the personal allowance changes. In recent years, the code 1257L has been common, meaning a personal allowance of £12,570. If the government increases the personal allowance in future, the standard code is likely to go up as well, possibly to 1260L, 1270L, or higher, depending on the new allowance figure.

This code applies if you have one job or pension and qualify for the full personal allowance. It tells your employer or pension provider how much of your income is tax-free.

Special Tax Codes and What They Mean

The numbers in your tax code tell your employer or pension provider how much tax-free income you get in that tax year.

Letters in your tax code refer to your situation and how it affects your Personal Allowance.

Emergency Tax Codes

An emergency tax code is a temporary code used when HMRC doesn’t have enough details to assign the correct code in time after a change in circumstances, such as:

• a new job
• working for an employer after being self-employed
• getting company benefits or the State Pension

Common emergency codes include:

• 1257 W1 (when you’re paid weekly)
• 1257 M1 (when you’re paid monthly)
• 1257 X (when you get paid varies)

HMRC typically updates your tax code once it receives the correct information from you or your employer. This process can take up to 35 days. Until then, the emergency tax code will remain in use for the rest of the current tax year, ensuring you still pay the correct amount of tax overall. When the new tax year begins, HMRC should switch you to a standard (non-emergency) tax code.

Watch the video below from HMRC to understand what an emergency code is:

Your tax code significantly impacts your take-home pay. When your tax code is accurate, you’ll pay the right amount of tax throughout the year. If it’s incorrect, you might end up paying too much and losing out on money that should have been yours. Conversely, if you pay too little, you could face an unexpected tax bill down the line.

You can watch the video from HMRC on “How does a tax code work?”

How Are PAYE Tax Codes Updated?

Your tax code can change when:

• Your personal allowance is updated for a new tax year
• You start a new job or pension
• You claim certain benefits or expenses
• You have more than one job or pension
• You underpay or overpay tax

HMRC updates your code automatically based on the information they receive from your employer, pension provider, or directly from you.

Where Do I Find My Tax Code?

You can find your tax code:

• On HMRC’s website, by logging in to your Personal Tax Account here: check your tax code for the current year
• on the HMRC app
• on your latest payslip
• on a P45
• on a P60
• on a ‘Tax Code Notice’ letter from HMRC if you get one
• By contacting HMRC: Income Tax: general enquiries – GOV.UK  

You can use the tax code checker by HMRC to find out what the numbers and letters in your tax code mean and how much tax you will pay. It’s a good idea to check your code periodically, especially if your income changes, you start a new job, claim benefits, or receive additional income like rental earnings or pensions. 

If You Think Your Tax Code is Wrong

If you believe your tax code is incorrect, you can use the Check your Income Tax online service to:

• update your job or employment details
• inform HMRC about any changes to your income that could have affected your tax code
• contact HMRC directly if you're unable to use the online service

After updating your information

HMRC will let you know if your tax code has been changed. They’ll also inform your employer or pension provider of the update.

Your next payslip should show:

• your updated tax code
• any adjustments to your pay if you’ve been under- or overpaying tax

Acting on someone else’s behalf

If you're updating HMRC about another person’s income (such as a client, if you're an accountant), you’ll need to fill in a PAYE Coding Notice query form.

The Personal Allowance is the amount of income you can earn before you start paying Income Tax.

For the 2025/26 tax year, the Personal Allowance remains at £12,570. 

If your income exceeds £100,000, your personal allowance decreases by £1 for every £2 of income over this threshold. This means once your income hits £125,140, you’ll no longer be entitled to any personal allowance.

The UK has a tiered tax system, meaning the more you earn, the higher the rate of tax you pay on your extra income. For the 2025/26 tax year, below are the income tax rates and thresholds:

Scotland’s Income Tax Bands

Scotland has a slightly different structure. For the 2025/26 tax year:

In addition to personal allowance and tax bands, there are other allowances that help reduce your tax bill. 

Blind Person’s Allowance

If you're registered blind or severely sight impaired, you can claim this extra tax-free allowance. For 2025/26, the blind person’s allowance is £3,130. This amount is added to your personal allowance, giving you more tax-free income.

Marriage Allowance

Marriage Allowance lets one partner transfer a portion of their personal allowance to their spouse or civil partner. This applies when one person earns less than the personal allowance, and the other pays tax at the basic rate. For 2025/26, the marriage allowance is set to £1,260, saving up to £252 a year. 

Dividend Allowance

If you own shares in a company, you may get a dividend payment. Each year, you can earn some dividend income tax free. You only pay tax on any dividend above the dividend allowance. For 2025/26, dividend allowance remains the same as the previous year, i.e. £500. This means you can earn up to £500 in dividend income tax-free.

Savings Allowance

The savings allowance gives tax-free interest on your savings. It depends on your income level:

• £1,000 for basic rate taxpayers
• £500 for higher rate taxpayers
• £0 for additional rate taxpayers

While tax codes and allowances might seem like small numbers on your payslip, they can have a big impact on your take-home pay. Keeping yourself updated on the changes to tax codes and allowances for 2025/26 is vital to avoid overpaying or underpaying your taxes, and it helps you take full advantage of the allowances available to you.

If in doubt, always reach out to our accountants. We offer a free, no-obligation consultation to help you get started. Whether you're looking to verify your tax code, make sure you're claiming all your allowances, or just want to strategise your taxes more effectively, we've got you covered.