K Tax Codes Explained: When HMRC Collects Tax on Negative Allowances
Most tax codes end in a letter after a number (like 1257L). A K code flips the format — the number represents extra income to add, not an allowance to deduct. Here's why K codes exist and what to check if you get one.
How a K Code Differs From a Standard Code
Tax code letters explained| Standard code (e.g. 1257L) | K code (e.g. K475) |
|---|---|
| Number represents an allowance to deduct before tax | Number represents extra taxable income to add on top of pay |
| Reduces taxable pay | Increases taxable pay |
| Used when allowances exceed taxable deductions | Used when deductions exceed allowances |
What Causes a K Code
| Cause | Example |
|---|---|
| Company benefits in kind exceeding your Personal Allowance | Company car + medical insurance worth more than £12,570 |
| State Pension using the whole Personal Allowance | Full Personal Allowance already absorbed by State Pension, employment taxed via K code on the rest |
| Previous underpaid tax being collected | A prior-year P800 underpayment recovered through this year's code |
| Other untaxed income HMRC knows about | Certain rental or investment income HMRC collects through PAYE rather than Self Assessment |
The 50% Cap
To stop a K code from taking an unreasonable chunk of a single payslip, HMRC caps the extra tax a K code can collect at 50% of that specific payment. If your calculated K-code deduction would exceed that cap in one pay period, the excess simply rolls forward and is collected from later payments during the tax year, rather than being lost or written off.
Example: if your normal tax and NI deductions plus the K-code extra would total more than 50% of your gross pay in a given month, only enough is taken to reach the 50% limit that month, with the remainder collected in subsequent months.
Checking Your K Code Is Right
- Request or check your P2 coding notice, which itemises exactly what's been deducted from your allowances and why.
- Compare each deduction against your own records — for a company car, check the actual P11D value and CO2 band against what HMRC has used.
- If you believe a figure is wrong (an old benefit no longer applies, for example), contact HMRC to have the code corrected — an inflated K code means you're paying more tax than necessary until it's fixed.
- Keep an eye on your payslip each month to confirm the K code is being applied as expected, particularly after any change in circumstances.
What to Do if You Think Your K Code Is Wrong
Contact HMRC via your Personal Tax Account or by phone, with details of what you believe should be different (an ended benefit, a paid-off underpayment, a change of employer). HMRC will reissue a corrected code to your employer or pension provider, and any overpaid tax already collected under the incorrect code is refunded, either automatically or via a claim.
Frequently asked questions
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