Pay As You Earn (PAYE) is how HMRC collects Income Tax and National Insurance directly from your salary each pay period, before you receive it. Your employer calculates and deducts both based on your tax code.
Common Tax Codes 2026/27
Tax Code
Meaning
1257L
Standard code — full £12,570 Personal Allowance
BR
All income taxed at basic rate (20%), no allowance — usually a second job
D0
All income taxed at higher rate (40%)
NT
No tax deducted
K-prefix
Negative allowance — extra income being taxed (e.g. company benefits)
Running Payroll for Your Business?
This calculator is built for individuals checking their own numbers. If you're running payroll for a team, a dedicated platform automates this calculation for every employee, every pay run.
Small business, first hire: set up PAYE and auto-enrolment correctly from day one.
Growing team: automate payslips, RTI submissions and pension contributions.
Multiple pay rates or contractors: handle mixed PAYE/self-employed workforces in one place.
Switching from spreadsheets: reduce manual errors on tax code changes and NI category switches.
Cloud payroll platforms like Xero, QuickBooks and BrightPay handle Income Tax, NI, student loan and pension deductions automatically.
Pay As You Earn is the system HMRC uses to collect Income Tax and National Insurance directly from your salary each pay period, calculated by your employer based on your tax code.
What does tax code 1257L mean?
1257L is the standard 2026/27 tax code, giving you the full £12,570 Personal Allowance spread evenly across the tax year.
Why did my PAYE deduction change this month?
Common causes: a bonus pushed you into a higher tax band temporarily, your tax code changed, or you crossed the National Insurance Upper Earnings Limit.
Can I check my PAYE deductions are correct?
Yes — compare your payslip figures against this calculator or HMRC's own estimator at gov.uk/estimate-income-tax using your gross pay and tax code.