Written and reviewed by James Whitfield · Updated for 2026/27 · Editorial standards · Methodology
What a K tax code means, why HMRC issues one (company car, State Pension, tax owed, savings interest), how to read the number, a worked example, the rule that stops payroll taking more than half your pay, and how to check it.
A K tax code means the income or benefits HMRC needs to tax through your pay (a company car, State Pension, tax owed, savings interest) are bigger than your £12,570 Personal Allowance1. Instead of tax-free pay, payroll adds the K amount to your taxable pay: K243 adds about £2,430 a year. Your employer can never take more than half of your pre-tax pay under a K code1.
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Typical default outputs for quick context.
Every tax code is your allowances minus the things HMRC wants to collect through payroll. When the deductions are bigger than the allowances, the result is negative, and the code starts with K. Drop the last digit of the negative figure to get the number.
| Situation | Allowances | Deductions | Net | Code |
|---|---|---|---|---|
| Standard | £12,570 | £0 | £12,570 | 1257L |
| Company car benefit £3,000 | £12,570 | £3,000 | £9,570 | 957L |
| Company car benefit £15,000 | £12,570 | £15,000 | −£2,430 | K243 |
Codes are illustrations of the arithmetic. HMRC's coding notice (P2) and your personal tax account list the exact allowances and deductions it used.
Leah earns £40,000 and has a company car with a taxable benefit of £15,000. Her deductions are £2,430 more than her allowance, so her code is K243. Payroll treats her taxable pay as £40,000 + £2,430 = £42,430 for the year.
Tax: £37,700 × 20% + £4,730 × 40% = £9,432.00 a year, about £786.00 a month. That is exactly the tax on £55,000 of salary plus benefit, which is the point: the K code collects the tax on the car through her pay.
The 50% limit does not bite here: her monthly pay is £3,333.33 and the tax is well under half of it. It matters for smaller pensions and low pay: on £800 a month, payroll can take at most £400 whatever the K code says.
Current tax-year thresholds used across this guide and calculator.
It means you have income or deductions higher than your Personal Allowance that are not already taxed, so the tax on them is collected through this job or pension.
Allowances minus deductions. If deductions are bigger, the result is negative: £12,570 minus £15,000 is minus £2,430, so the code is K243 and payroll adds about £2,430 a year to your taxable pay.
No. Your employer or pension provider cannot take more than half of your pre-tax pay or pension in tax under a K code.
The State Pension is taxable but paid without tax deducted. A full new State Pension uses almost all of the £12,570 allowance, so HMRC collects the tax through the code on a workplace or private pension, which can push it into a K code.
No. A K code changes income tax only. National Insurance is worked out on your actual pay.
Check the deductions in your personal tax account. If a benefit has ended or an estimate is wrong, update it and HMRC sends a new code. If the K code is collecting tax owed, it ends once the debt is paid.
The rates, thresholds and rules on this page are drawn from the official UK government sources below, using the confirmed 2026/27 figures. Each link opens the relevant HMRC or GOV.UK page in a new tab.
Verified against published UK government guidance for 2026/27.