1257LX Tax Code Meaning & How It Compares to Other Codes

Understanding your tax code is crucial for ensuring you’re paying the correct amount of tax in the UK.

HMRC assigns tax codes to employees based on their personal allowance, income, and tax status. One such tax code that many individuals come across is 1257LX.

This guide explains what the 1257LX tax code means, why you might have it, how it affects your income, and how it compares to other UK tax codes.

What Does the 1257LX Tax Code Mean?

The 1257LX tax code is a temporary tax code assigned by HMRC under the PAYE (Pay As You Earn) system.

It is used when HMRC does not have enough information about an individual’s earnings or previous tax payments. This tax code affects how income tax is calculated and deducted from an employee’s salary.

Breaking Down the 1257LX Tax Code

• 1257L: The “1257L” part of the tax code represents the standard tax-free personal allowance of £12,570 for the tax year. This means that individuals with this tax code do not pay income tax on the first £12,570 of their annual earnings.
• X (Non-Cumulative Tax Code): The “X” suffix indicates that the tax is applied on a non-cumulative basis. Instead of adjusting tax deductions based on total earnings throughout the year, tax is calculated separately for each pay period (weekly or monthly).

How the 1257LX Tax Code Works?

Unlike a cumulative tax code (such as 1257L), the 1257LX tax code does not take previous earnings or tax payments into account.

Each time an individual is paid, their tax is calculated only for that specific pay period, without considering whether they have overpaid or underpaid tax in previous months.

Because of its non-cumulative nature, 1257LX is often a temporary tax code, typically assigned when an individual starts a new job, changes employers without a P45, or HMRC is still processing their full income details.

While it allows for the standard personal allowance, it can sometimes lead to overpayment or underpayment of tax, requiring adjustments later in the tax year.

Why Have I Been Assigned the 1257LX Tax Code?

The 1257LX tax code is typically assigned in cases where HMRC lacks full information to determine the appropriate tax code for the full tax year. Common reasons for being placed on this code include:

• Starting a new job: If an employee moves to a new employer without a P45 from their previous job, HMRC may apply a temporary tax code.
• Missing tax records: If an employer does not receive an updated tax code from HMRC, they may use the 1257LX code as an interim measure.
• Returning to work after a break: Individuals re-entering employment after a period of unemployment or self-employment may be assigned this tax code until HMRC receives updated income details.
• Holding multiple jobs: If an individual has more than one source of PAYE income, their tax codes may be adjusted to ensure the correct amount of tax is deducted.

This code is often temporary, and HMRC will typically update it once they have received all necessary information.

How Does the 1257LX Tax Code Affect My Take-Home Pay?

Since the 1257LX tax code is non-cumulative, it can have a significant impact on an employee’s take-home pay:

• PAYE deductions apply only to the current pay period: The tax is calculated as though it’s the first time earnings are being taxed, without considering previous income or tax paid.
• Higher or lower tax deductions: Depending on the employee’s earnings, this may result in higher or lower deductions compared to a cumulative tax code.
• Potential tax overpayment: If too much tax is deducted, HMRC may issue a tax refund at the end of the tax year or once the tax code is corrected.
• Possibility of underpayment: If insufficient tax is deducted, HMRC may later adjust the tax code to recover the unpaid amount.

Employees assigned this tax code should regularly check their payslip and update their tax records if necessary.

How Is the 1257LX Tax Code Different from 1257L?

The 1257LX and 1257L tax codes are similar in that they both grant the standard £12,570 tax-free personal allowance in the UK.

However, the key difference lies in how tax is calculated and whether the tax code operates on a cumulative or non-cumulative basis.

Key Differences Between 1257LX and 1257L

1257L – The Standard Tax Code

• The 1257L tax code is the most common tax code for UK employees.
• It is cumulative, meaning tax is adjusted over time, ensuring that individuals are taxed correctly based on their total income for the year.
• If an individual underpays or overpays tax in one month, the following month’s tax calculation adjusts automatically.
• This tax code is usually assigned when HMRC has full records of an individual’s employment history and income.

1257LX – The Non-Cumulative (Emergency) Tax Code

• The 1257LX tax code is a temporary, emergency tax code.
• It is non-cumulative, meaning tax is calculated separately for each pay period (weekly or monthly) without considering any previous earnings or tax paid.
• As a result, individuals on 1257LX may experience higher or lower tax deductions than expected.
• This code is often assigned when HMRC lacks complete tax records, such as when an individual starts a new job without a P45 or switches employers mid-year.

Why Does the Difference Matter?

• Employees on 1257LX may temporarily overpay tax, as it does not consider past earnings and tax deductions. If an individual has already paid tax in a previous job, this code does not adjust for it.
• Tax refunds may be necessary at the end of the tax year if too much tax has been deducted. HMRC typically corrects this automatically.
• 1257L is the preferred tax code, as it ensures smoother tax calculations throughout the year.
• If an individual has been wrongly assigned 1257LX, they should contact HMRC to request an update to 1257L, ensuring accurate tax deductions.

Understanding these differences is essential for managing personal finances and avoiding unexpected tax bills. Checking payslips and confirming tax codes with HMRC can help ensure that the correct tax code is applied.

Can I Change My 1257LX Tax Code?

Employees who believe they have been incorrectly assigned the 1257LX tax code can take the following steps to request a change:

1. Check your payslip: The tax code is typically listed alongside salary details and National Insurance deductions.
2. Review your tax code online: Log into your Personal Tax Account on GOV.UK to see your current tax code and any HMRC updates.
3. Provide missing employment details: If a P45 was not given to a new employer, provide one or complete a Starter Checklist.
4. Contact HMRC: If the tax code is incorrect, HMRC can update it based on the latest employment details. They can be reached at 0300 200 3300 or through their online services.
5. Inform your employer: Once HMRC updates the tax code, the employer will receive a notification and apply the correct deductions.

It is important to act promptly, as delays in updating the tax code can result in unnecessary tax deductions.

What Are Other Common UK Tax Codes and How Do They Compare?

The 1257LX tax code is just one of many used in the UK tax system. Other common tax codes include:

• 1257L: The standard tax code for employees entitled to the full personal allowance.
• BR (Basic Rate): Applies a 20% tax rate on all earnings, often used for second jobs.
• D0 (Higher Rate): Applies a 40% tax rate on all earnings, typically used when an individual has additional income sources.
• D1 (Additional Rate): Applies a 45% tax rate, usually for high earners.
• 0T: No personal allowance is applied, often used when HMRC lacks full income details.
• K Codes: Used when deductions (such as unpaid tax or work benefits) exceed the personal allowance.

If an employee believes they are on the wrong tax code, they should verify their code with HMRC and request an adjustment if necessary.

How Can I Check If My Tax Code Is Correct?

To ensure tax is being deducted correctly, employees should check their tax code regularly. Here’s how:

• Look at your payslip – The tax code appears next to salary and tax deductions.
• Log into GOV.UK: Use the HMRC tax checker to view and update tax codes.
• Compare with a tax coding notice: HMRC sends tax coding notices explaining any changes.
• Consult your employer; If the tax code does not match expected earnings, check whether your employer has received an update from HMRC.
• Call HMRC: If there are discrepancies, contact HMRC directly to correct the tax code.

Employees who find they are on the wrong tax code should take action promptly to avoid overpaying or underpaying tax.

Conclusion

The 1257LX tax code is a non-cumulative tax code that is often assigned in emergency tax situations.

Unlike the standard 1257L code, 1257LX does not take previous income into account, which may result in temporary overpayments or underpayments.

If you are assigned this tax code, it is crucial to check whether it is correct and contact HMRC if necessary.

Regularly reviewing your payslip and understanding how tax codes work can help ensure you are not paying more tax than you should.

FAQs

What does the “X” mean in the 1257LX tax code?

The “X” indicates a non-cumulative tax basis, meaning each pay period is taxed independently, without considering past earnings or tax payments.

Is the 1257LX tax code permanent?

No, it is often temporary and may be adjusted once HMRC has updated your tax records.

How do I contact HMRC about my tax code?

You can contact HMRC by calling 0300 200 3300 or using the Personal Tax Account on GOV.UK.

Can I get a tax refund if I was on the wrong code?

Yes, if you have overpaid tax due to an incorrect code, HMRC will issue a refund once your tax code is corrected.

Does 1257LX apply to self-employed individuals?

No, self-employed individuals are taxed through Self Assessment and do not have PAYE tax codes.

What happens if my tax code changes mid-year?

If HMRC updates your tax code mid-year, any overpaid or underpaid tax will be adjusted in future payslips.

How often does HMRC update tax codes?

HMRC reviews and updates tax codes annually or whenever there is a change in your tax situation.