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How do I read my tax code notice and check it's right?

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UKUpdated 6 October 2026 · Written by BuyMeWhiskey Editorial Team · How we check facts

Your tax code notice starts with the £12,570 Personal Allowance, takes off untaxed income such as savings interest or State Pension and any benefits or debts, and turns what's left into your code, so check every deduction against your own records.

Have your notice in front of you? Sign in to HMRC's Check your Income Tax service to see the same figures and correct anything that's out of date.

Check your Income Tax on GOV.UK

How the number on your notice is worked out

A tax code notice is HMRC showing its working. It starts with your tax-free Personal Allowance, which is £12,570 for most people in 2026/27. Then it takes off anything HMRC wants to collect tax on through your pay or pension. GOV.UK gives two main types of deduction:

income you haven't paid tax on, such as untaxed savings interest, part-time earnings or, for pensioners, State Pension, which your private pension provider usually collects the tax on
other deductions, such as company benefits, the High Income Child Benefit Charge or paying back a Winter Fuel Payment

Whatever is left is your tax-free amount from that job or pension. HMRC drops the last digit and adds a letter. So £11,000 becomes 1100L. If your untaxed income is more than your allowance, you get a K code, and the calculation works differently.

What the letters tell you

Letter	Meaning
L	Standard Personal Allowance
S / C	Taxed at Scottish (S) or Welsh (C) rates
M / N	Marriage Allowance received (M) or transferred to your partner (N)
BR, D0, D1	All income from this source taxed at basic, higher or additional rate, usually a second job or pension
0T	No tax-free amount from this source, or your employer doesn't have your details
NT	No tax taken from this income
W1, M1, X	Emergency code

The line that confuses most people: "untaxed interest"

If HMRC thinks you'll earn savings interest, it may add an estimate to your code, based on what your bank reported for the previous year. That reduces your tax-free amount, so a little more tax comes off your pay or pension.

The problem is that a tax code can only shrink your Personal Allowance. It can't show the two extra savings allowances that many people get on top:

Starting rate for savings: up to £5,000 of interest tax-free if your other income is under £17,570. Every £1 of other income above your Personal Allowance reduces it by £1.
Personal Savings Allowance: £1,000 of interest tax-free for basic-rate taxpayers, or £500 for higher-rate taxpayers. Additional-rate taxpayers get none.

So if your income is close to the Personal Allowance and your interest is modest, an "untaxed interest" deduction can mean you pay tax you don't owe. If the estimate looks wrong, or the interest should be covered by these allowances, ask HMRC to update it.

How to check your notice line by line

Check the income figures. Make sure the pension, job and State Pension amounts match your payslips or award letters for this tax year.
Check each deduction. Compare untaxed interest with roughly 12 months of interest from your statements. GOV.UK suggests taking your average monthly interest and multiplying by 12.
Check the allowance. The 2026/27 Personal Allowance is £12,570. A common mistake is to remember it as £12,750.
Check where the allowance is used. With two pensions or jobs, one of them often has a BR code, which taxes all of that income at the basic rate. Make sure your allowance is being given against the other one.

If something's wrong

The quickest fix is to sign in to HMRC's Check your Income Tax service or the HMRC app and update the details. If you can't use those, you can contact HMRC. If your code needs to change, HMRC tells you and your employer or pension provider within 15 working days. If you're paid monthly, the new code should be used on your next pay or the one after. Any tax you've overpaid this year is usually refunded through your pay or pension once the new code is used. Otherwise HMRC checks your tax after 5 April and sends a P800 letter between June and March.

Tax on £11,800 pension + £974 interest (Scotland, 2026/27)

Worked example

A retired woman in Scotland has a defined benefit pension of £3,400 and SIPP drawdown of £8,400 a year, so £11,800 of pension income. Her bank paid £974 of interest last year.

What she actually owes for 2026/27: her pensions use £11,800 of her £12,570 Personal Allowance, leaving £770. That covers the first £770 of interest, leaving £974 − £770 = £204. Her other income is below £17,570, so she gets the full £5,000 starting rate for savings, and the £204 is tax-free. Her correct tax bill is £0.
What happens if her code deducts the interest: £12,570 − £974 = £11,596 tax-free, so a code of about S1159L. That leaves £11,800 − £11,596 = £204 of pension taxed at the 19% Scottish starter rate, which is £38.76 a year, or about £3.23 a month.
In England, Wales or Northern Ireland, the same code would collect £204 × 20% = £40.80.

Her understanding is right: she shouldn't be paying tax. The fix is to ask HMRC to remove or correct the untaxed interest so her code goes back to S1257L. Anything already overpaid comes back through her pension or in a P800 after the tax year.

What does 'less untaxed interest' mean on my tax code notice?#

HMRC has estimated savings interest you'll earn this year, usually based on last year's figure from your bank, and is collecting tax on it through your pay or pension by cutting your tax-free amount. If the interest is covered by the starting rate for savings or your Personal Savings Allowance, or the estimate is wrong, ask HMRC to update it.

Why am I paying tax on my pension when I'm under the Personal Allowance?#

Usually because your tax code takes off something else, such as State Pension, untaxed interest or a second pension, so the tax-free amount on that pension is less than £12,570. Check every deduction on the notice. If one is wrong, update it through Check your Income Tax or the HMRC app.

How is my tax code number worked out?#

HMRC starts with your £12,570 Personal Allowance, takes off untaxed income and other deductions, then drops the last digit and adds a letter. For example, £12,570 minus a £1,570 company benefit leaves £11,000, which becomes 1100L. If your untaxed income is more than your allowance, you get a K code instead.

What do the letters in my tax code mean?#

L means the standard Personal Allowance, while S and C mean Scottish or Welsh rates. BR, D0 and D1 tax all income from that source at one rate, usually for a second job or pension. 0T means no tax-free amount from that source, and W1, M1 or X means an emergency code.

What should I do if my tax code notice is wrong?#

Sign in to HMRC's Check your Income Tax service or the HMRC app and correct your income, pension or benefit details. If you can't use those, you can contact HMRC. If your code needs to change, HMRC sends the new code to you and your employer or pension provider within 15 working days.

Will I get a refund if my tax code was wrong?#

Yes, if you've overpaid. When HMRC updates your code and has your income details, it usually asks your employer or pension provider to refund the difference through your pay or pension. Otherwise, it checks after 5 April and sends a P800 tax calculation between June and March.

Can I get tax-free savings interest on top of my Personal Allowance?#

Yes. If your other income is under £17,570, the starting rate for savings can make up to £5,000 of interest tax-free, reduced £1 for every £1 of other income above your allowance. On top of that, the Personal Savings Allowance covers £1,000 of interest for basic-rate taxpayers or £500 for higher-rate taxpayers.

Keep reading

Sources

Figures checked against these sources on 6 October 2026. If a rule changes, we update the page and its date.

General information, not personal financial advice. Rules depend on your circumstances; check the official source or speak to a regulated adviser before acting.