Tax Code K Explained

A K at the start of your tax code (e.g. K475) means you have income that isn't being taxed another way – such as company benefits, untaxed pension or savings interest, or unpaid tax from an earlier year – and it's worth more than your tax-free allowance. Instead of tax-free pay, the number is added to your taxable pay. Roughly, multiply the number by 10 to see how much is added: K475 adds about £4,750 a year.

How your pay is taxed on K

Example (England, £30,000 salary, code K100): payroll adds about £1,000 a year (£83.33 a month) to your pay. Monthly taxable pay = £2,500 + £83.33 = £2,583.33 × 20% = about £516.67 Income Tax a month, versus £290.50 on 1257L. How a K code arises: say you have the £12,570 allowance but a company car benefit of £13,570. £12,570 − £13,570 = −£1,000, so the code becomes K100. HMRC rules mean your employer cannot take more than half your pay (before deductions) in tax in any pay period – with £2,500 a month, tax can't exceed £1,250. Anything not collected is carried forward or settled later.

Tax-free allowance from this code£12,570Cumulative

Income tax with this code	£3,486
Income tax with standard 1257L	£3,486
Difference per month	£0.00

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Why you might have this code

You have taxable benefits (company car, fuel, private medical insurance) worth more than your allowance.
You get the State Pension, which is paid without tax, so HMRC collects it through your private pension or job code.
HMRC is collecting tax you owe from a previous year (an underpayment).
You have untaxed income – savings interest above your Personal Savings Allowance, rental or other income – being collected via PAYE.

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.
Check each item HMRC deducted: benefits, State Pension amount, estimated interest, underpayments. Estimates can be out of date.
If a benefit has ended or your interest has dropped, update your details online or call HMRC.
If you dispute an underpayment, contact HMRC before it is collected.

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

HMRC’s exact K-code arithmetic

HMRC’s PAYE Manual sets out the steps. Start with allowances of £12,570 and take off a company car benefit of £14,120. That leaves a shortfall of 1,550. Drop the last digit and the minus sign (155), reduce the last digit by one, and add a K: the code is K154.

Payroll then adds roughly the code number ×10 to your taxable pay each year. HMRC’s employer guide shows K475 on a £27,000 salary giving taxable income of £31,750. Spread across 12 monthly pay periods, a K code increases each month’s taxable pay. It doesn’t take a lump sum all at once.

The 50% limit in practice

Since April 2015, HMRC’s regulatory limit applies to every tax code, not just K codes: tax deducted on any payday can’t be more than half the gross pay for that period. The employer collects any shortfall on a later payday if it can.

Example: a £500-a-month private pension paid on code K1200. Payroll adds £1,000.00 a month, making taxable pay of £1,500.00 and normal tax of £300.00. The 50% limit caps the deduction at £250.00. HMRC’s manual says there is no benefit in issuing a code that is known to under-deduct like this. Staff are told to take non-PAYE income or underpayments out of the code and collect them another way, such as Simple Assessment or a Self Assessment return.

One exception is specific: HMRC’s manual says State Pension and Child Benefit (High Income Child Benefit Charge) deductions should not be removed from the code even where the 50% limit is exceeded.

A K code that arrives mid-year

HMRC’s manual has a worked example from 2017/18. A salesman on £25,000 is given a company car worth £5,000 from 31 October and reports it in his personal tax account the same day. HMRC calculates £583.40 of extra tax due on the car for the first seven months. It then adds a one-off restriction to his code so that this is recovered by 5 April. His allowances minus the car minus the restriction come out negative, so the new code is K27 on a month 1 basis.

The lesson: a K code with M1 straight after you report a benefit is usually HMRC collecting tax you’d otherwise owe in a single bill. The one-off restriction is only for the rest of that tax year, so the code is recalculated without it from 6 April.

Limits on what can be put in a K code

HMRC only collects an underpayment through your code if you have enough PAYE income and it won’t breach the 50% limit or double your normal tax.
Self Assessment balances can only be collected through your code if you owe less than £3,000 and filed online by 30 December (or on paper by 31 October).
For other debts sent for coding, HMRC uses a sliding scale. The limit is £3,000 for earnings under £30,000, rising to £17,000 for £90,000 or more. Tax credit debts need your consent.
You can object to any item. HMRC’s manual says that if you object to non-PAYE income (such as savings interest) being collected through your code, it removes that deduction.

Frequently asked questions

What does K475 mean?

About £4,750 a year (£395.83 a month) is added to your taxable pay, because your untaxed income or benefits exceed your allowance by that amount.

Can a K code take all my pay?

No. The employer cannot deduct more than 50% of your pay in a pay period through a K code.

Why do pensioners get K codes?

Often because the State Pension (£241.30 a week for the full new State Pension) almost uses up the £12,570 allowance, so savings interest or a small underpayment pushes the code negative. See our pensioner tax codes page.

Is a K code bad?

No – it means tax is collected in instalments rather than in one bill. But check it, because it's often based on estimates.

What does SK or CK mean?

A K code taxed at Scottish (S) or Welsh (C) rates.

Why is my K code one lower than I calculated?

HMRC’s method drops the last digit of the shortfall and then reduces the result by one. A £1,550 shortfall becomes K154, not K155.

Why does my new K code have M1 after it?

HMRC usually issues a mid-year reduction on a week 1 / month 1 basis, so the extra tax for the months already passed is spread over the rest of the year. Its manual example ends with code K27 on a month 1 basis after a company car was reported in October.

Can I pay instead of having a K code?

Yes. If the K code includes an underpayment, you can pay HMRC directly before the new tax year starts and ask for your code to be recalculated.

Sources

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