How the tax on each payslip is worked out

Every page and calculator reads one parameter file, built from HMRC's and HM Treasury's published rates, read on 29 October 2026, each value with its source. The payroll calculation follows HMRC's Specification for PAYE Tax Table Routines, version 24.0 of February 2026, the document payroll software is built from. Automated tests check the engine against examples worked by hand from that text.

1. Reading the code

A code may start with S (Scottish rates) or C (Welsh rates), then hold either a number and a suffix letter (L, M, N, T), a K followed by a number, or one of BR, D0 to D3, NT and 0T. W1, M1, X or NONCUM at the end means the week 1 or month 1 basis. NT has no Scottish or Welsh version, and the emergency code has a single UK value without S or C (GOV.UK).

2. Free pay and additional pay

For a number up to 500, the free pay for week 1 or month 1 is the number times ten plus nine, divided by 52 or 12 and rounded up to the next penny. A larger number is split into multiples of 500 and a remainder: each 500 is worth £96.16 a week or £416.67 a month, and the remainder is worked out as above. For code 1257 this gives £1,048.26 a month and £241.92 a week. For a K code the same figure is added to pay instead of taken off.

3. Cumulative tax

Pay to date minus free pay for the number of weeks or months gone gives taxable pay to date. The band thresholds for the period are the yearly bands times the period number divided by 52 or 12, taken to four decimal places; the tax on each full band is accrued the same way. The taxable pay, rounded down to the pound, is placed in its band and taxed: tax on the bands below plus the rate on the excess, rounded down to the penny. The tax on the payslip is the tax due to date minus the tax already paid. On £3,000 in month 1 with 1257L, this gives £390.20.

4. The 50% limit

Tax taken in one pay cannot exceed half of that pay, excluding payrolled benefits. With a cumulative code, the tax not taken is carried in the calculation and collected later if pay allows; any amount left at the end of the year is between the employee and HMRC (K codes on GOV.UK).

5. BR, D and NT codes, and the week 1 basis

BR taxes the whole pay, rounded down to the pound, at the basic rate; D0 at the next rate up, D1 the one after (in Scotland SBR at 20%, SD0 at 21% up to SD3 at 48%). NT takes no tax. On the week 1 or month 1 basis, each pay is taxed alone as if it were period 1, with no refund of earlier tax.

6. Rates used

2026 to 2027: Personal Allowance £12,570, bands and rates for England, Northern Ireland, Scotland and Wales from the rates and thresholds for employers and the specification's appendices. 2027 to 2028: main rates from Annex A of the Budget overview of 28 October 2026. The Scottish rates for that year are announced with the Scottish Budget on 3 December 2026 (Scottish Government); until then the calculators use the 2026 to 2027 Scottish rates and say so.

7. Expected codes and yearly gaps

The right code checker starts from the Personal Allowance, cut by £1 for each £2 of income over £100,000, adds or removes £1,260 of Marriage Allowance, takes off the State Pension and company benefits and adds job expenses, then drops the last digit. A second source gets BR, or D0 and above when the main pay already reaches a higher band. The tax due for the year is compared with what the codes take on a monthly payroll. HMRC builds codes from its own records, which can hold items this estimate does not see: savings interest, rental income or an earlier underpayment.

8. What the site does not do

• It does not see your HMRC record or change your code: only HMRC can, through its online service or app.
• It does not work out National Insurance, student loan or pension deductions, only Income Tax.
• It does not keep anything you type: the calculators run in your browser.

Method version of 29 October 2026. A figure that looks wrong: contact.