UK Tax Codes · 2026/27
K Tax Code Meaning — Owed Tax Adjustment (UK 2026/27)
Who gets the K Codes tax code?
K codes most commonly apply to (1) people with significant taxable benefits-in-kind (company car, private medical, fuel benefits) that exceed the personal allowance, (2) people with underpaid tax from previous years being recovered through code adjustment, or (3) people with multiple sources of income where allowance has been over-allocated.
How K Codes affects your pay
Instead of subtracting your allowance from earnings before tax, K codes ADD an amount to your taxable earnings. K100 adds £1,000 to your taxable income; K500 adds £5,000. The result: more tax taken at source. This is HMRC's way of recovering money owed via PAYE rather than sending you a Self Assessment bill.
When to check this code
If you suddenly receive a K code, check (1) your P11D for benefits-in-kind values, (2) any HMRC letters about underpaid tax from previous years, and (3) whether you have multiple income sources. K codes always indicate that something has changed — confirm what triggered it.
What to do if it's wrong
K codes are often correct but worth verifying because they take significantly more tax. Log into your HMRC personal tax account to see the breakdown of how the K number was calculated. Common issues: wrong P11D figures from a previous employer, BIK that's actually been removed, or duplicated underpayment recovery. Contact HMRC if the breakdown doesn't make sense.
Example calculation
On £40,000 with K500: taxable income is £40,000 + £5,000 = £45,000 (no personal allowance, plus £5k uplift). Tax: 20% × £37,700 + 40% × £7,300 = £7,540 + £2,920 = £10,460. Compare to 1257L: only £5,486. K500 costs you about £4,974 extra — usually because you owe HMRC something or have £5k of BIK.
Recruiter pro tip
K codes typically run for one or two tax years — once the underpayment or BIK is fully accounted for, the code reverts to a normal letter code. If your K code persists for 3+ years, something's stuck — call HMRC. Also check whether the trigger (BIK, underpayment) actually still applies; sometimes K codes survive past their cause and need manual correction.
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