You put an employee’s tax code into your payroll software to work out how much tax to deduct from their pay throughout the year.
This guide is also available in Welsh (Cymraeg).
There’s a separate guide on tax codes if you’re an employee.
What you need to do
You usually need to update your employee’s tax code at the start of a new tax year. If the tax code changes during the year, HM Revenue and Customs (HMRC) will email you - you should update your payroll records as soon as possible.
Tax code 1250L
The most common tax code for tax year 2020 to 2021 is 1250L. It’s used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).
1250L is an emergency tax code only if followed by ‘W1’, ‘M1’ or ‘X’. Emergency codes can be used if a new employee doesn’t have a P45.