In the United Kingdom, tax codes play a vital role in determining how much income tax is deducted from an individual’s earnings. For employees in London and across the UK, understanding these codes can significantly influence financial planning and day-to-day budgeting.
One such tax code, 1257LM1, often appears on payslips but is not always fully understood. As we move into the 2025/26 tax year, many may find themselves assigned this code without knowing what it means or how it affects their salary.
This article aims to explore the ins and outs of the tax code 1257LM1, why it’s used, and what impact it can have on your income during this tax year.
What Does the Tax Code 1257LM1 Actually Mean in 2025/26?
The tax code 1257LM1 is made up of three components that reflect an individual’s tax status. The number 1257 represents the standard personal allowance for the 2025/26 tax year, which means you can earn £12,570 before paying income tax.
The “L” indicates that the taxpayer is entitled to this standard personal allowance. However, the “M1” part is what makes this code unique and potentially more impactful.
M1 stands for “Month 1 basis,” a non-cumulative calculation method. Rather than considering your income and tax contributions across the entire tax year, it treats each payslip as if it’s your first. This means previous earnings or tax deductions are not taken into account, which can lead to temporary overpayment of tax until your record is corrected.
Why Might Someone Be Assigned the 1257LM1 Tax Code?
The appearance of this code is usually triggered by changes in employment or missing information. If you’ve recently started a new job and your employer hasn’t received your P45, they might apply a temporary tax code like 1257LM1. Similarly, individuals who move between multiple jobs in a short period or who fail to supply complete income details could also find themselves on this tax code.
In essence, HMRC uses this code as a stopgap measure. It’s a way of making sure that tax is still collected albeit potentially too much while they wait for more accurate data about your earnings and tax history. Though it may seem inconvenient, it’s generally not permanent.
How Does the M1 Indicator in 1257LM1 Affect Take-Home Pay?
The M1 component can significantly affect your monthly salary because it doesn’t consider cumulative earnings. With a regular tax code like 1257L, tax calculations take into account what you’ve already earned and paid over the course of the year. This allows for a more balanced monthly deduction.
By contrast, under 1257LM1, each monthly payslip is treated as if it’s the first one of the year. This often leads to higher-than-expected deductions, particularly if you’ve already used part of your personal allowance earlier in the year.
The result is a lower take-home salary, at least temporarily. Once HMRC has the correct information, your tax code should be updated and any overpaid tax can usually be reclaimed.
What Is the Personal Allowance for the 2025/26 Tax Year?
The personal allowance is the amount of income you can earn without paying income tax. For the 2025/26 tax year, this remains at £12,570, the same as the previous year. This allowance is spread across the tax year unless a non-cumulative code like 1257LM1 is applied. When used on a cumulative basis (as with the 1257L code), the allowance is divided equally across the year’s pay periods, providing a consistent monthly benefit.
However, under the 1257LM1 code, the allowance is applied only to that month, not accounting for any prior usage. This often results in a mismatch between your total earnings and your expected take-home pay. While this can lead to more tax being deducted in the short term, it’s not a loss. it’s usually reconciled later by HMRC.
How Does 1257LM1 Compare to Other Common Tax Codes?
To understand 1257LM1 better, it’s helpful to see how it compares to other frequently used UK tax codes. The standard 1257L code is what most employees will have when their tax records are accurate and up-to-date. It applies the personal allowance on a cumulative basis, offering more balanced tax deductions.
Other tax codes include BR, which taxes all income at the basic rate of 20% without applying any personal allowance, often used for second jobs. Then there’s 0T, which applies when neither personal allowance nor previous tax data is considered similar to BR but more severe.
D0 is another one, used for higher earners, applying a flat 40% tax. Compared to these, 1257LM1 is more lenient but still temporary and potentially problematic for budgeting.
What Should You Do If You Think Your Tax Code Is Incorrect?
If you believe you’ve been wrongly assigned the 1257LM1 code, it’s essential to act quickly. Start by reviewing your payslip and checking your tax code on your personal tax account via the HMRC website. If the code seems incorrect or if you notice unusual tax deductions, contact HMRC directly.
You’ll need your National Insurance number and employment details to discuss your case. If you’ve recently changed jobs, make sure your new employer has received your P45 or that you’ve filled out a starter checklist. In most cases, once the correct data is received, HMRC will issue a revised code, and your employer will adjust your deductions accordingly.
When Will HMRC Update Your Tax Code Automatically?
HMRC updates tax codes automatically once they have the correct and complete employment data. This typically happens when your employer submits your pay details via Real Time Information (RTI) or once your P45 has been processed. If you’re enrolled in Self Assessment, changes can also occur after you’ve filed your tax return.
After an update, both you and your employer will receive notification. It’s important to monitor these changes to ensure your payslip reflects the new code promptly. If you’re on 1257LM1 due to a temporary issue, it’s likely that HMRC will correct it within a few pay periods especially if your employer is prompt in submitting updated data.
Can the 1257LM1 Tax Code Lead to Overpaying or Underpaying Tax?
This is one of the most common concerns associated with 1257LM1. Because it doesn’t take into account previous earnings or allowances used earlier in the year, it may result in overpayment of tax. While that can be frustrating in the short term, especially when your take-home pay is noticeably lower, it’s usually corrected later in the tax year or after you submit a tax return.
Less commonly, it might lead to underpayment if the tax code underestimates your total annual income, but this is rare with M1 codes. In either case, HMRC will reconcile your tax situation and either issue a refund or request repayment of underpaid tax. Keeping your employment records up to date and checking your tax code regularly can help avoid surprises.
How Can You Estimate the Effect of 1257LM1 on Your Salary?
If you’re curious about how much this tax code is affecting your pay, there are tools available that can help. The HMRC website features a tax calculator, and third-party tools like MoneySavingExpert’s Salary Checker allow you to compare your gross and net income under different tax scenarios.
For instance, someone earning £3,000 per month under the standard 1257L code might take home around £2,400. However, under 1257LM1, the same person could see a lower net amount, potentially around £2,300 or less, due to the temporary over-taxation caused by the M1 adjustment. These figures are only estimates, but they can help you plan and highlight the need to act if something seems off.
Conclusion
The 1257LM1 tax code is often a temporary classification used by HMRC when full employment data isn’t yet available. While it includes the standard personal allowance, the M1 element means your tax is calculated as if it’s your first payslip of the year. This can lead to higher deductions, resulting in a lower take home salary, but it’s usually rectified once HMRC has the correct information.
For workers in London and across the UK, staying informed about your tax code is more than just a paperwork task. it’s essential for protecting your income and managing your finances wisely. If you’re unsure about your current code, or believe it’s incorrect, don’t hesitate to check with HMRC or your employer to ensure you’re not overpaying or missing out on allowances you’re entitled to.
FAQs About Tax Code 1257LM1
What does the M1 in 1257LM1 stand for?
The M1 in the tax code refers to “Month 1 basis,” which means tax is calculated only on the current month’s income rather than cumulatively across the year.
Is tax code 1257LM1 permanent?
No, it is typically a temporary code used when HMRC doesn’t have your complete tax history, often due to missing employment details or a new job.
Can I claim back tax if I’ve been overcharged under 1257LM1?
Yes, if too much tax has been deducted, HMRC will usually refund you automatically once your code is corrected. You can also request a refund if necessary.
How do I correct an incorrect tax code?
You can correct your tax code by contacting HMRC, either online or by phone, and providing your most up-to-date employment information, including a recent P45 if available.
Does 1257LM1 affect student loan repayments?
Yes, as all deductions including student loans are based on your gross income, a change in tax code that affects take-home pay may also affect how much is deducted.
How can I find out what my current tax code is?
You can check your tax code on your payslip, your tax code notice from HMRC, or by logging into your personal tax account on the GOV.UK website.
Will my employer update my tax code?
Your employer uses the code provided by HMRC. Once HMRC updates it, they’ll send the new code directly to your employer, who will apply it in the next payroll cycle.
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