How K codes work
In a standard tax code like 1257L, the number represents tax-free personal allowance. In a K code, the number works in reverse — it's extra taxable income being added to your pay. Multiply the number by 10:
- K475 → £4,750 of extra taxable income added to your salary each year
- K950 → £9,500 of extra income added
- K1257 → £12,570 of extra income added (extremely rare, only for very high benefits)
So if your salary is £35,000 and you're on K475, your taxable income is treated as £35,000 + £4,750 = £39,750 for PAYE purposes.
Why K codes are issued
K codes are usually triggered by:
- Significant benefits in kind that exceed your personal allowance (large company car, expensive private medical, accommodation provided)
- State Pension paid alongside a salary — the State Pension is taxable but isn't subject to PAYE on its own; HMRC collects the tax via your salary's code
- Underpaid tax from a previous year being recovered through PAYE
- Multiple income sources that need consolidating into a single code
The 50% cap
To stop K codes draining your take-home, HMRC caps the tax deducted in any pay period at 50% of your gross pay. If the K code would take more than that, the excess rolls forward to the next pay period until it clears.
This is why someone on a high K code (K1500+) might see "balanced" deductions month after month rather than one extreme month — the cap smooths the recovery.
When to question a K code
Check your HMRC Personal Tax Account at gov.uk/personal-tax-account for the breakdown of which benefits, pension income, or owed tax made up the K calculation. If you've recently changed jobs, sold a company car, or otherwise reduced your benefits, your code should drop accordingly — and you can prompt HMRC to update it directly from the Personal Tax Account.