What is the 1257L Tax Code? – Meaning, Calculations, and How to Fix the Incorrect Tax Code Error

Every salaried employee in the UK receives a payslip and is most likely to get a tax code issued directly by the HM Revenue and Customs Department. One of the most common is the 1257L tax code. People generally consider this a random number and pass it on. However, it is a critical component in your income journey. 

So, what does the 1275L tax code mean? How does it work? We have explained everything in this blog. Keep on reading!

What is a 1257L Tax Code?

Before diving into the 1257L tax code meaning, let’s first start from the basics. Tax code is a mix of numbers and letters issued by HMRC to give an idea of your overall taxes on your income to the employers and pension providers. 

This is an important factor in determining how much of your income is tax-free for personal allowances and how much has to be given to the government as taxes. Incorrect tax codes often create financial problems. You might end up overpaying, depleting your personal money, or underpaying, which may result in fines. 

Thus, to sum up, tax codes are essential to be compliant with the government rules of employment. 

What is Tax Code 1257L?

Tax code 1257 L applies to all people who have one job and whose income does not fall into the tax bracket. This is the most common one in the UK, offering a personal allowance of £12,570, and L stands for eligibility. Currently, this works only for the period of 2023/24 and 2024/25, and the tax code will not change until 2028.

Let’s understand how the 1256l tax code is used for the tax calculation. If you have a single source of income of £35,000 per year. So, according to the calculation, £12,570 is your tax-free amount. 

Taxable amount = £35,000 – £12,570 = £22,470

£22,470 is the amount on which you’ll have to pay tax to the authorities in that particular income year.

Who Gets 1257L M1 Tax Code?

As we are aware of the 1257L M1 tax code now, let’s understand who gets it here. This specific Tax Identification Number is usually issued to someone:

• Having a single source of income. 
• Are under the State Pension age.
• Do not claim the blind Person’s Allowance or Marriage Allowance.
• Have a good track record of paying taxes. 
• Has not recently changed any jobs or has jumped into a higher income category. 

This tax code was issued in April 2021 in the form of changing tax rules; before that, 1250L was the most common one. If you used to have 1250L, you must have seen the automatic changes past April 2021.  This tax code has been locked by the authorities till April 2028 and will continue until any further updates. 

How Does a 1257L Code Calculator Work?

1257L Code Calculator is a method of calculating your taxable income. Instead of going to an accountant, you can do the maths yourself using the method given below:

• Start by inputting your gross income (weekly, monthly, and annual) before any deductions.
• As the tax code s1257l says, your tax-free income is up to £12,570, the calculator will subtract the total amount from these numbers and you will get the correct results. 

Here’s the tax rate according to the income slab you’re in:

Income Slab	Tax Rate
Up to £12,570	0%
£12,571 – £50,270	20%
£50,271 – £125,140	40%
Over £125,140	45%

How to Find the Tax Code 1257L?

Knowing where to locate the tax code is crucial in order to check if it’s correct or not. The incorrect ones will put you on the wrong side. You will either pay too much, reducing your in-hand money, or pay less while accumulating underpaying tax fines. Make sure to take the necessary steps to save on taxes. 

Here’s how you can find and check yours: 

• Payslip: Generally written close to your National Insurance number. 
• P60 or P45: Overviews of your annual earnings and withholdings. 
• Tax Code Notification (P2): Issued by HMRC whenever there is a change in your code. You will get an email from the authorities or your employer.
• HMRC Online: Go to the HMRC official site and access your Tax Account for complete information.

In case you find another tax code like 1370M or 1185N, first confirm your income slab, and when you are sure of it, see the steps to correct it in the next section. 

Wrong Tax Code: What Happens and How to Fix?

The misinformation around the job change, pension issues, or a new source of income can place you in the wrong tax bracket. If you are in the 1257L tax code, this generally means you pay 0% up to £12,570. 

Putting in the wrong tax bracket supposedly means you are paying a higher tax rate according to your basic income. Thus, it is important that you take the necessary steps to fix the issues and save up money. 

Here are the steps to fix it: 

• Check your current tax code on the payslip or HMRC account. 
• If it’s incorrect, call HMRC or log in to your personal tax account. 
• On the website, provide your National Insurance number, job change details, and current employment proof and salary slips. 
• Submit this information correctly, and HMRC will issue a new code according to your employment. 

Please note that every time you receive your payslip, always make sure to check the tax code 1257L on it to avoid any errors in tax payments. Also, make sure to check with your employer for any payroll software issues. 

Important Points to Note About Tax Code 1257L M1?

Let’s discuss some important pointers here regarding the tax code 1257L M1:

• Self-employed people do not receive tax codes. They report their annual income in the self-assessment system and calculate their taxes. 
• People with private pensions may still have 1257L m1 tax code. In case of multiple pension sources, the authorities classify the taxes under codes BR or D0.
• If you have Blind Person’s Allowance, your tax-free income will not lie in the 1257L and will increase significantly with the 1544L code for a total allowance of £15,440.
• In case of marriage allowance, if one partner earns under £12,570 and the other above £12,570, the tax codes may change into 1370M or 1185N.

Wrapping Up!

Even though the 1257L tax code is the most common in the UK. The mistakes happen due to factors like job changes, jumping to higher income strata, and more. Just remember to always check your payslips, inform HMRC in case of changes, and stay updated with the tax rules. 

We have explained everything from 1257l tax code meaning to the steps to correct in this blog. Hopefully, this information will help you out. Share the blog with your friends and family to make them aware too!