What is Tax Code K?
A K tax code means your deductions are larger than your Personal Allowance, so extra tax is added to your bill.
Based on published HMRC 2026/27 tax thresholds
Last updated: 26 July 2026
Tax Code K Explained
A K tax code is used when your total deductions — such as company benefits-in-kind, State Pension income, or tax owed from previous years — exceed your Personal Allowance of £12,570. Instead of reducing your taxable income, HMRC effectively adds the excess to your taxable earnings, increasing the amount of tax collected through your payroll.
For example, if you receive £5,000 of untaxed benefits and your Personal Allowance is £12,570, HMRC would normally offset part of your allowance against the benefit. But if your deductions exceed your allowance entirely, a K code is issued. A code of K500 means £5,000 is added to your taxable income each year (£500 × 10).
The amount collected through a K code is subject to a 50% regulatory limit — HMRC cannot deduct more than half your gross pay in any single pay period through this mechanism, even if the code would otherwise require it.
K codes are more common among those with significant company car benefits, those receiving the State Pension alongside employment income, or those with tax arrears from previous years.
Comparison: Tax Code K vs Standard 1257L
| Feature | Code K | Standard 1257L |
|---|---|---|
| Effect on taxable income | Increases it (negative allowance) | Reduces it |
| Personal Allowance | Fully offset or exceeded | £12,570 |
| Example: K500 | Adds £5,000 to taxable income | Removes £12,570 from taxable income |
| Maximum deduction in one pay period | 50% of gross pay (regulatory cap) | No cap (standard PAYE) |
| Common reason | Benefits-in-kind, arrears, State Pension | Standard employment, no adjustments |
⚠️ When Does Tax Code K Apply?
- You receive company benefits (e.g. a company car) whose taxable value exceeds your remaining Personal Allowance
- You receive the State Pension alongside employment income and the combined deductions exceed your allowance
- HMRC is collecting unpaid tax from a previous year and your allowance is insufficient to cover it
- You have other untaxed income (e.g. rental income) that HMRC is collecting via your employment code
Tax Code K — FAQs
A K code means your deductions — usually from benefits-in-kind or tax owed — are greater than your Personal Allowance. HMRC adds the excess to your taxable income, so you pay more tax than usual through your payslip.
Not necessarily — it simply reflects your personal tax situation. It often means you receive valuable company benefits, or that HMRC is collecting tax you genuinely owe. The key is to verify the code is correct; errors do occur.
HMRC will send you a PAYE Coding Notice (P2) explaining what makes up your K code. Check that each item listed is accurate. If you believe any element is wrong, contact HMRC on 0300 200 3300.
No. There is a regulatory limit of 50% of your gross pay — your employer cannot deduct more than half your pay in a single period via a K code, even if the full amount is owed. Any undercollected tax will be pursued by HMRC separately.
An emergency tax code (such as 1257L W1/M1) applies a non-cumulative basis, often resulting in temporary overpayment. A K code is a calculated code reflecting specific deductions that exceed your allowance, and is usually intentional rather than temporary.
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