A tax code starting with K means you have income or deductions that are not otherwise taxed and are bigger than your £12,570 Personal Allowance. Instead of giving you tax-free pay, the code adds an amount to your taxable pay. K475 adds £4,750 a year. Your employer cannot take more than half your pay in tax under a K code.
HMRC uses a K code when you owe tax from a previous year, get State Pension or taxable State benefits, have taxable company benefits such as a car, or have savings interest above your Personal Savings Allowance (HMRC). Using your job's tax code to collect that tax spreads it across the year instead of leaving you with a bill.
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K codes at a glance
| Question | Answer | Source |
|---|---|---|
| What does K mean? | Your untaxed income or deductions exceed your Personal Allowance | HMRC |
| How is the number read? | Multiply by 10: K475 adds £4,750 a year to taxable pay | HMRC |
| Maximum tax under a K code | Half of your pay before tax in each pay period (the overriding limit) | HMRC |
| Standard Personal Allowance 2026/27 | £12,570 | HMRC |
| Basic rate band (England, Wales, NI) | 20% on the first £37,700 of taxable pay | HMRC |
| Underpayments collected through a code | Usually under £3,000 | HMRC |
How to read a K code
A normal code such as 1257L gives you £12,570 of tax-free pay. A K code works the other way round:
- K475 adds £4,750 a year to your taxable pay.
- K543 adds £5,430.
- K1100 adds £11,000.
The K is not a special rate. Your employer adds the K amount, spread across the year, to your pay and then applies the normal tax bands. On a monthly payroll that is one-twelfth of the K amount each month.
What causes a K code
Company benefits bigger than your allowance
A company car, private medical insurance and other benefits are taken off your Personal Allowance. If they add up to more than £12,570, what is left over becomes a K code.
| Line | Amount |
|---|---|
| Personal Allowance | £12,570 |
| Company car and fuel benefit | −£16,000 |
| Medical insurance | −£2,000 |
| Allowance left | −£5,430 |
| Tax code | K543 |
See the P11D guide and company car tax guide.
Tax owed from an earlier year
If a P800 showed you owed less than £3,000, HMRC usually collects it through your code over 12 months from the next tax year (HMRC). To collect £1,200 from a basic-rate taxpayer, HMRC reduces the allowance by £1,200 ÷ 20% = £6,000. If other adjustments already use most of your allowance, that can take the code below zero.
State Pension alongside a job
State Pension is taxable but paid without tax taken off, so HMRC collects the tax through the code on your job or private pension. The full new State Pension is £241.30 a week in 2026/27, which is £12,547.60 over 52 weeks (DWP). That uses almost all of a £12,570 allowance on its own, so any company benefit or tax owed on top is likely to produce a K code on the job.
How the 50% limit works
Your employer or pension provider cannot take more than half of your pay before tax in a pay period when using a K code (HMRC). HMRC calls this the overriding limit (HMRC payrolling guidance). Tax that cannot be collected in one period is collected later if possible, or reconciled after the year ends.
Worked example: limit not reached
Monthly pay £2,500, code K543.
| Line | Amount |
|---|---|
| Pay | £2,500.00 |
| Plus one-twelfth of £5,430 | £452.50 |
| Taxable pay this month | £2,952.50 |
| Tax at 20% | £590.50 |
| 50% of pay | £1,250.00 |
| Tax deducted | £590.50 |
Worked example: limit reached
Monthly pay £800, code K2500.
| Line | Amount |
|---|---|
| Pay | £800.00 |
| Plus one-twelfth of £25,000 | £2,083.33 |
| Taxable pay this month | £2,883.33 |
| Tax at 20% | £576.67 |
| 50% of pay | £400.00 |
| Tax deducted | £400.00 |
| Not collected this month | £176.67 |
Both examples use the 20% basic rate and assume the taxable pay stays within the basic rate band for the month.
How much tax a K code costs
For someone in England earning £40,000 a year from one job with no other income, using the 2026/27 bands (HMRC):
| Code | Taxable pay | Tax for the year |
|---|---|---|
| 1257L | £27,430 | £5,486 |
| 0T | £40,000 | £8,460 |
| K200 | £42,000 | £9,260 |
| K1000 | £50,000 | £12,460 |
With 1257L the first £12,570 is tax-free and the next £27,430 is taxed at 20%. With 0T or a K code there is no tax-free pay: the first £37,700 of taxable pay is taxed at 20% and the rest at 40%. An earlier version of this table understated the 0T and K figures; these are recalculated.
If your K code looks wrong
- Read the coding notice. HMRC usually writes to explain a new code (a P2 coding notice), and your personal tax account shows how the code is made up.
- Check each deduction. Common errors are a company car handed back but still on your record, a medical benefit that ended, an underpayment already paid, or the wrong State Pension figure.
- Tell HMRC. You can update many items through your personal tax account, or call 0300 200 3300 (HMRC).
- Check the next payslip. HMRC sends your employer the new code, and on a normal cumulative code any tax overpaid so far this year is usually returned through payroll.
When a K code is right
If your benefits or other income really are bigger than your allowance, a K code is the correct way to collect the tax. Removing it would not remove the tax; it would move it to a bill after the year ends.
Frequently asked questions
What does a K tax code mean?
It means your untaxed income or deductions, such as company benefits, State Pension or tax owed from an earlier year, are bigger than your Personal Allowance. The code adds the difference to your taxable pay. K475 adds £4,750 a year.
Is there a limit to how much tax a K code can take?
Yes. Your employer or pension provider cannot take more than half of your pay before tax in any pay period when using a K code. Any tax that cannot be collected is picked up later or reconciled after the year ends.
Why have I got a K code?
The usual reasons are company benefits worth more than your Personal Allowance, tax owed from an earlier year being collected through your code, State Pension or taxable benefits being taxed through your job, or savings interest above your Personal Savings Allowance.
How do I get rid of a K code?
If the items in it are correct, you cannot, because it is how the tax is collected. If an item is wrong, such as a benefit you no longer get, tell HMRC through your personal tax account or on 0300 200 3300 and it will issue a new code.
Sources
All sources were opened and checked by PayslipIQ on 21 September 2026.
- HMRC (GOV.UK): If you have a K in your tax code. Causes and the half-of-pay limit. Verified 21 Sep 2026.
- HMRC (GOV.UK): What your tax code means. Verified 21 Sep 2026.
- HMRC (GOV.UK): Payrolling: tax employees' benefits and expenses through your payroll. The overriding limit. Verified 21 Sep 2026.
- HMRC (GOV.UK): Rates and thresholds for employers 2026 to 2027 and Income Tax rates and Personal Allowances. Verified 21 Sep 2026.
- HMRC (GOV.UK): If your P800 says you owe tax. Verified 21 Sep 2026.
- DWP (GOV.UK): The new State Pension. Verified 21 Sep 2026.
- HMRC (GOV.UK): Income Tax: enquiries. Verified 21 Sep 2026.
Disclaimer
PayslipIQ provides educational guidance based on published HMRC rules. It is not regulated tax advice. Scottish taxpayers have different bands, and a K code interacting with several jobs or pensions can be complex; contact HMRC if the figures do not make sense.
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Check my payslip freePayslipIQ provides educational information and estimated calculations only. It does not provide tax, legal, financial, payroll, accounting, pension, benefits or employment advice. Always verify your payslip, tax code, deductions and take-home pay with your employer's payroll department, HMRC, your pension provider, a qualified accountant, tax adviser or another appropriately qualified professional.