1263L tax code: what does this mean and how do I check if it’s correct? 

It’s not exciting deciphering your tax code on your payslip each month, but understanding it can ensure that you’re not overpaying or underpaying on tax.  

While the majority of people will likely have 1257L as their tax code, some may have 1263L.  

We explore what this means, how to check it’s correct, and what to do if it isn’t. 

What is a tax code, and which one is the most common? 

A tax code is an easy way for HMRC to determine how much tax you must pay.  

It comprises a series of numbers followed by a letter to let your employer know how much tax needs to be deducted from your monthly salary.  

Your tax code may be adjusted to account for specific allowances, other income, or pension tax relief if you’re a higher or additional-rate taxpayer, and it’s done via relief at source.   

The most common tax code is 1257L, which is used for those with one job and no taxable benefits. It reflects that the individual has the standard personal allowance of £12,570, so they pay no tax until they earn over this amount. 

It’s worth noting that if the code 1257L is followed by ‘W1,’ ‘M1,’ or ‘X,’ it is an emergency tax code.  

If you’re self-employed, you won’t have a tax code – you’ll have a unique taxpayer reference (UTR) instead, while if you have more than one job, you may have different tax codes.  

What does a 1263L tax code mean? 

A 1263L tax code means you can earn slightly more than the standard personal allowance before paying any tax – in this case, you can earn £12,630 instead of £12,570. 

You may have tax code 1263L because HMRC has added a flat rate of allowable expenses, which are essential business costs that are not taxable.   

This extra £60 could, for example, help you cover the cost of maintaining and cleaning your work uniform, or cover another allowable expense (if your employer doesn’t already cover this).  

If you’re a basic-rate taxpayer on tax code 1263L, you’ll save £12 a year in tax, while higher-rate taxpayers will save £24.  

Other allowable expenses that could mean you’re entitled to a higher personal allowance include using your own car for business trips, professional subscriptions needed for work, and if you have to work from home but your employer doesn’t reimburse you.  

How do I check if my tax code is correct? 

You can check your tax code on your payslip, on correspondence from HMRC, or on your HMRC account.  

Whether it’s correct depends on your unique circumstances – for example, do you have more than one job? Are you eligible for any allowable expenses? Have there been any recent changes that could impact your tax code? 

There may be some occasions when you are on an emergency tax code, such as starting a new job, working for an employer after being self-employed, receiving the state pension or company benefits.  

It’s also worth considering if you’re eligible for allowances, such as the marriage allowance, which could reduce the amount of tax you must pay.  

If you’re unsure if you’re on the right tax code, it’s worth getting in touch with HMRC, who can look at this and correct it if need be. Failing to notify HMRC about an incorrect tax code can result in you paying either too much or too little in tax. 

Can I apply for a 1263L tax code?  

If you think you may be eligible for the 1263L tax code, HMRC has a handy page that’ll let you check if you are allowed to claim, how much you can claim, and the process.  

Some industries and jobs allow you to claim more than £60 in tax relief, so it’s worth checking.  

Get expert financial advice 

It’s easy to overlook the importance of being on the correct tax code, but it’s vital to make sure you’re on the right one, so you’re not paying too much – or too little – tax.  

If you’re unsure if you’re on the correct tax code, you should contact HMRC. If you have complex financial circumstances, you may want to consider consulting an expert who can ensure you’re claiming any allowances you may be eligible for.  

Unbiased can match you with a qualified financial adviser or accountant.