Last updated: 14 October 2026
What does a negative tax code mean?
A negative tax code is a K code, such as K475. It means your untaxed income or benefits are more than your Personal Allowance, so HMRC adds an amount to your taxable pay instead of giving you a tax-free allowance. This often happens if you have a company car, medical insurance, untaxed rental income, or an underpayment from a previous year being collected through your code. With K475, £4,750 is added to your taxable pay over the year. Multiply the number by 10 to see the amount added.
How K codes work
| Code | Meaning |
| 1257L | £12,570 tax-free pay (standard) |
| 500L | £5,000 tax-free pay; allowance reduced by benefits |
| K475 | £4,750 added to taxable pay |
| BR | All pay taxed at 20%; no allowance |
| 0T | No allowance; taxed at normal bands |
Common causes
- Company car and fuel benefits
- Private medical insurance through work
- State Pension, which is paid without tax, collected through a pension or job code
- Underpaid tax from earlier years
- Rental or savings income HMRC estimates
The 50% limit
Employers can’t deduct more than 50% of your pay in tax through a K code in any pay period. If the code would take more, the excess is carried forward or collected later.
Example
Mike’s employer gives him a company car with a taxable benefit of £12,000 and medical insurance worth £1,800. His benefits total £13,800, more than his £12,570 allowance by £1,230. His tax code is K123, so £1,230 is added to his salary for tax each year. He also has £120 of underpaid tax from last year being collected; as a basic rate taxpayer, that’s equivalent to £600 of extra taxable pay, making his code K183. When he hands back the car, he tells HMRC so his code can be updated.
Is a K code wrong?
Check your coding notice or personal tax account:
- Are the benefits right and current?
- Is the underpayment correct?
- Is HMRC’s estimate of untaxed income realistic?
If not, tell HMRC through your personal tax account or the app.
Payrolled benefits
If your employer payrolls benefits, they’re taxed through your pay without reducing your code, so you’re more likely to have 1257L. Payrolling becomes compulsory from April 2027.
Common mistakes
- Ignoring a coding notice
- Not telling HMRC when a benefit ends
- Assuming K codes are always errors
- Not checking the underpayment amount
Records to keep
Keep coding notices, P11Ds and payslips. They let you check HMRC’s figures and claim back overpaid tax.
Starting a new job with a K code
If you move jobs, your new employer may use an emergency code until HMRC sends the right one. Check your first payslips, as a K code carried across incorrectly, or not carried across at all, can lead to too much or too little tax being taken.
Frequently asked questions
Can I have a K code on a pension?
Yes, often to collect tax on the State Pension.
Does a K code mean I owe money?
It means more tax is collected through pay.
How do I change it?
Update your details with HMRC.
Do Scottish taxpayers get SK codes?
Yes.
Related: is a plain P45 or P60 valid, how much tax you owe and company car tax rises.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with tax codes and PAYE. See our payroll services service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
