Tax Code 1231L Explained

1231L means you have £12,310 of tax-free income – £260 less than the standard £12,570. HMRC has deducted something from your allowance to collect tax through your pay: commonly a taxable benefit, untaxed income such as savings interest, or tax you underpaid in a previous year.

Tax-free allowance implied by this code: £12,310 a year (£1,025.83 a month).

How your pay is taxed on 1231L

Example (England, £30,000, 1231L): (£30,000 − £12,310) × 20% = £3,538 a year, about £294.83 a month – £4.33 a month (£52 a year) more than 1257L. That £52 is exactly what a £260 reduction collects at 20%: for instance, a £52 underpayment from last year being repaid over 12 months.

Tax-free allowance from this code£12,310Cumulative

Income tax with this code	£3,538
Income tax with standard 1257L	£3,486
Difference per month	£4.33

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Why you might have this code

A previous-year underpayment (e.g. £52 owed ÷ 20% = £260 code reduction).
A taxable benefit from your employer, such as medical insurance.
Estimated untaxed income, such as savings interest above your Personal Savings Allowance.

What to do

Check the code HMRC holds for you in your personal tax account (GOV.UK sign-in) or the HMRC app – it also shows how the number was worked out.
Compare it with the code on your latest payslip. If they differ, ask payroll whether they have applied HMRC’s latest notice.
If the item is wrong (benefit ended, interest lower than estimated), tell HMRC to update it.
Underpayment collection through your code typically lasts only for that tax year; your code should return to 1257L afterwards.

See all tax codes or check your take-home with the UK salary calculator.

The exact size of the deduction

1231L means your net allowances are between £12,310 and £12,319. HMRC is deducting between £251 and £260 from your standard £12,570. The same deduction affects your tax differently depending on your rate – that’s the key to working out what it is.

Matching the deduction to its cause

If the breakdown in your personal tax account says “underpayment”, divide the deduction by your tax rate to see how much tax is being collected. A higher-rate taxpayer who owed the same £52 would only need a 130 deduction (1244L).

What HMRC is collecting	How it becomes a 260 deduction
£52 underpayment, basic-rate taxpayer	£52 ÷ 20% = £260
£104 underpayment, higher-rate taxpayer	£104 ÷ 40% = £260
£1,260 of savings interest (basic rate)	£1,260 − £1,000 Personal Savings Allowance = £260
£760 of savings interest (higher rate)	£760 − £500 allowance = £260
A £260 taxable benefit	Deducted pound for pound

Rules HMRC follows when collecting tax this way

Underpayments are usually collected in equal instalments over 12 months from the start of the following tax year, but only if you owe less than £3,000 and have enough PAYE income.
HMRC won’t code an underpayment if it would take more than 50% of your pay or double your normal tax.
If paying it through your code would cause hardship, HMRC can spread it further. Its manual allows up to three years. Coding in £100 or less isn’t normally treated as hardship.
You can pay HMRC directly before the new tax year starts to avoid the code reduction.

When 1231L should end

A deduction for last year’s underpayment applies for one tax year only, so the code should go back to 1257L the following April unless something else is outstanding. Deductions for interest or benefits continue for as long as the item does. If you’ve moved savings into an ISA or a benefit has stopped, update HMRC so the deduction is removed now rather than becoming a refund later.

What 1231L changes on each payslip

Monthly free pay falls from about £1,048.25 to £1,026.59 – roughly £21.66 less a month. A basic-rate taxpayer pays about £4.33 more tax each month (£8.66 at the higher rate). Weekly-paid staff lose about £5.00 of free pay a week.

In Scotland, S1231L costs a different amount depending on your band – 19% of the reduction at the starter rate, up to 42% or more at the higher rates. C1231L costs the same as in England.

Checking 1231L against your P800

If the deduction is an underpayment, it will usually follow a P800 tax calculation from the previous summer or autumn. That letter shows the tax owed and the income figures behind it. If you think those amounts are wrong, contact HMRC and say which figures are incorrect and what they should be. If HMRC agrees, it sends a new calculation and the code is changed.

Disputing the deduction

You can object to a coding notice at any time during the year. If an interest estimate is too high – for example because you’ve moved savings into an ISA – HMRC often accepts your figure, especially when the difference is small. If the deduction is an underpayment you disagree with, you can also ask HMRC to limit the amount coded if your normal PAYE tax for the year is less than the underpayment. HMRC’s manual says staff must then change the coding. An appeal about a coded underpayment that can’t be settled locally has to be referred to HMRC’s Head Office.

Frequently asked questions

Why has my code changed from 1257L to 1231L?

HMRC is collecting tax on something – the breakdown in your personal tax account or HMRC app lists it.

How much extra tax will I pay on 1231L?

About £52 a year at 20%, or £104 at 40%.

Is 1231L wrong?

Only if the deduction is wrong. Check whether a benefit, untaxed income or underpayment applies to you.

Can I pay the underpayment instead?

Yes – you can usually pay HMRC directly instead of having it collected through your code.

How do I tell whether 1231L is collecting £52 or £104?

Look at your tax rate. A £260 deduction collects £52 at 20% or £104 at 40%. The P800 that created the underpayment shows the exact amount.

Can HMRC spread an underpayment over more than one year?

Yes, in hardship cases. HMRC’s manual allows up to three years.

Does the deduction stop automatically?

An underpayment collected through your code stops at the end of the tax year. Interest and benefit deductions continue until HMRC’s figures change.

Is 1231L an emergency tax code?

No, unless it has W1, M1 or X after it. A plain 1231L is cumulative.

Does 1231L mean I did something wrong?

No. It usually means HMRC is collecting a small amount of tax on income or benefits it didn’t tax at source, or from an earlier year when your code was out of date.

Can a pension have code 1231L?

Yes. Pensioners often see small reductions like this when HMRC collects tax on savings interest through their pension rather than sending a separate bill.

Will 1231L show on my P60?

Your P60 shows the code in use on 5 April. If the deduction was only for that year, next year’s code – and next year’s P60 – should go back to the standard code.

Is S1231L or C1231L any different?

The £260 deduction is the same. C1231L costs the same as in England. S1231L costs between £49.40 and £109.20 a year, depending on your Scottish band.

Sources

Figures are taken from official government publications and were last reviewed on 2026-10-03.