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K tax codes explained

By the PaySlipCheck Editorial team · 15 May 2026 · 7 min read

If your tax code starts with K, you don't have a tax-free personal allowance — you have a negative allowance. HMRC is collecting extra tax through your salary because your untaxed income (state pension, taxable benefits, owed tax from a previous year) is bigger than your allowance. K codes are the most misunderstood codes in UK PAYE. Here's what they mean and what to do about them.

What K475 means (worked example)

A normal tax code like 1257L means "your annual allowance is £12,570" — the number times 10. A K code uses the same maths but the number represents a negative allowance — extra taxable income that gets added to your salary for tax purposes.

K475 means a negative allowance of £4,750. So if you earn £30,000 with K475, HMRC taxes you as if you earn £34,750. Like this:

Compare that to the same person on 1257L: they'd be taxed on £17,430 (£30k − £12,570 allowance) at 20% = £3,486. The K475 code costs them an extra £3,464 a year in Income Tax — collected via PAYE so they don't owe a separate bill.

Common reasons for a K code

1. State Pension while still working

The State Pension is taxable income but it's paid gross (no tax deducted at source). If you're receiving State Pension alongside a salary, HMRC reduces your personal allowance by the value of the pension. If your State Pension exceeds your allowance, the surplus becomes a negative allowance — i.e. a K code.

Example: Full new State Pension in 2025/26 is £11,973/year. If your tax-free allowance is £12,570, that leaves only £597 free for your salary — code 0060L. If the pension grows above your allowance you flip to a K code.

2. Benefits in kind (BiK)

A company car, private medical insurance, or other benefit in kind is taxable. Big benefits — a high-emission petrol BMW or expensive private health — can have BiK values bigger than your personal allowance. HMRC collects the tax via your tax code rather than via Self Assessment.

Example: a £18,000-list-price petrol car at 37% BiK has a BiK value of £6,660. Add medical insurance worth £1,500 and other small benefits, and total BiK might reach £8,500. Your remaining allowance would be £4,070, code 407L. If BiK grew to £15,000, your allowance would go negative — say, K243.

3. Underpaid tax from previous years

If HMRC discovers you owe them tax from a previous year (typically via the P800 reconciliation each summer), they collect it through your tax code over the next year or two. Small underpayments come off your allowance; large ones can flip the code to a K.

4. Combination of the above

Many K codes are the result of two or three factors stacking. State pension + a benefit in kind + a small underpayment from a previous year can easily produce a K500 or K600 code.

The 50% safety cap

HMRC has a rule designed to stop K codes from leaving you with nothing in your pocket: tax collected through a K code can never exceed 50% of your gross pay in any pay period. If the calculation would breach 50%, the K code only collects what it can within that limit and the remainder rolls over to a future period or is settled via Self Assessment.

This is rare in practice but matters for people with very large negative allowances and modest salaries — for example, a retiree with a £25,000 State Pension and a £15,000 part-time job. The 50% cap protects them from having more than half their wages disappear in tax.

How to find out why your code is K

Two places have the answer:

• HMRC P2 "Notice of Coding" — a letter or digital notice HMRC sends whenever your code changes. It itemises the components: allowance, benefits, untaxed income, owed tax. If you've thrown it away, you can usually find it in your Personal Tax Account.
• Your Personal Tax Account at gov.uk/personal-tax-account — shows the live tax code and the calculation behind it. You can also see what HMRC thinks your benefits in kind, pensions and other income are, and challenge any wrong values.

How to fix a wrong K code

If the K code is wrong — typically because HMRC's estimate of your benefits in kind is too high, or they're trying to collect tax you don't actually owe — you can challenge it:

1. Log into your Personal Tax Account.
2. Find the section "Check what you owe / Check your Income Tax".
3. Look at the breakdown of components. The "Benefits in kind" section lists what HMRC thinks you receive from your employer.
4. If any value is wrong (e.g. you returned the company car last year), use "Tell HMRC about a change" to correct it.
5. Wait 1–2 weeks for HMRC to issue a new P6 to your employer. Your next payslip should reflect the new code, often with a one-off refund.

For larger or more complex cases — especially if multiple years of tax are involved — call HMRC on 0300 200 3300.

Should I move from K code to Self Assessment?

Some K-coded taxpayers prefer to use Self Assessment to pay annually instead of having tax taken through PAYE monthly. The downsides:

• You'll need to budget for a large January bill — typically £2,000–£10,000 depending on your circumstances.
• Payments on account will apply if your bill exceeds £1,000 (you'll pay 50% of the expected next-year bill in January and another 50% in July).
• The K-code path is mechanically simpler — tax just comes off each month.

For most people with a K code, the PAYE collection mechanism is the path of least resistance. Self Assessment only really makes sense if you have other reasons to file (rental income, dividends, self-employment).

Quick reference: common K code values

Related: Decode any K code in the tax code checker · What does 1257L mean? · BR tax code explained · How to read your UK payslip