A 120T tax code means your employer or pension provider has been told to let you earn £1,200 tax-free this year before deducting income tax, and that HMRC, not your employer, controls any further adjustments to the code. That £1,200 is a long way below the standard £12,570 personal allowance carried by the usual 1257L code, so seeing 120T on a payslip almost always signals that something specific is stripping most of your allowance away.1GOV.UK. Tax Codes: What Your Tax Code Means
What the Number and the T Mean
The number in any PAYE code is your annual tax-free allowance with the last digit removed. Multiply 120 by ten and you get £1,200. Multiply 1257 by ten and you get the full £12,570 personal allowance most people receive.1GOV.UK. Tax Codes: What Your Tax Code Means
The T at the end is often misread. It does not mean your file is under investigation. HMRC’s internal guidance describes T as an instruction to employers not to adjust the code by the standard amount on their own; HMRC reviews T-coded taxpayers before authorising any change.2HM Revenue and Customs. PAYE Manual – PAYE11075 – Coding: Codes: How They Are Used and Calculated: Suffix Codes You tend to get a T when your allowance involves calculations the standard L code cannot handle: high-income tapering, benefits in kind, or other layered adjustments.1GOV.UK. Tax Codes: What Your Tax Code Means
Why Your Allowance Has Been Cut to £1,200
High-Income Personal Allowance Taper
The most common reason for an allowance this low is the taper on the personal allowance. Once your adjusted net income passes £100,000, you lose £1 of allowance for every £2 above that threshold, and the allowance is gone completely at £125,140.3GOV.UK. Income Tax Rates and Personal Allowances
Work the arithmetic backwards and 120T sits in a narrow band. Cutting £12,570 down to £1,200 needs a reduction of £11,370, which needs £22,740 of income above the £100,000 line. That points to adjusted net income around £122,740. If your income is somewhere in that range, the code is doing what it should. If your income is well below £100,000 and you still have 120T, something is off and worth checking.
Benefits in Kind
Perks such as a company car or private medical insurance have a taxable value, and HMRC collects the tax by shrinking your allowance rather than sending a separate bill. A car worth £3,000 in taxable benefit cuts your coding allowance by £3,000, and several benefits stacked together add up quickly.4GOV.UK. Payrolling: Tax Employees’ Benefits and Expenses Through Your Payroll Benefits alone rarely drag an allowance all the way to £1,200, but they often sit alongside the other causes below.
Underpaid Tax From a Previous Year
When you owe HMRC from an earlier year, they usually recover it by reducing this year’s coding allowance rather than demanding a lump sum. HMRC calls this “coding out.” Underpayments of up to £2,999.99 can be collected this way; anything £3,000 or more has to be paid separately through Self Assessment or a direct payment.5HM Revenue and Customs. PAYE Manual – PAYE12070 – Coding: Coding Deductions and Expenses: Underpayments A coded-out underpayment on top of other deductions can easily push an allowance down to around £1,200.
Untaxed Savings Interest
If your savings interest exceeds your Personal Savings Allowance, HMRC can collect the tax through PAYE rather than through Self Assessment. Banks and building societies report interest to HMRC each year, and HMRC uses that data to reduce your coding allowance.6HM Revenue and Customs. PAYE Manual – PAYE12060 – Coding: Coding Deductions and Expenses: Non-PAYE Income You can opt out on your Self Assessment return and pay the tax that way instead.
High Income Child Benefit Charge
If you or your partner claim Child Benefit and your adjusted net income is above £60,000, you owe the High Income Child Benefit Charge. You repay 1% of the Child Benefit for every £200 earned above that threshold, and repayment is total once income reaches £80,000.7GOV.UK. High Income Child Benefit Charge HMRC can collect this charge through the code, shrinking your allowance further.
How to Check Whether 120T Is Right for You
The document that matters most is the P2 Notice of Coding. It lists every allowance and every deduction that make up your code, side by side. If you cannot find the paper version, it is available in your Personal Tax Account and in the HMRC app.8HM Revenue and Customs. PAYE Manual – PAYE11030 – Coding: Codes: How They Are Used and Calculated: P2 Notice of Coding
Pull these alongside it:
- Your P60, issued by your employer after the tax year ends, showing total pay and tax deducted.9GOV.UK. Your P45, P60 and P11D Form – P60
- Your P45 from any job you have left, which your next employer uses to work out deductions.10GOV.UK. Your P45, P60 and P11D Form: Why You Get Each Form
- Your P11D, if your employer provides benefits in kind, showing the cash value reported to HMRC for each one. Ask your employer for a copy if you do not have it.11GOV.UK. Your P45, P60 and P11D Form – P11D
Compare the figures on the P2 with what these records actually show. The usual errors are benefits valued at the wrong amount, an underpayment being coded out after you have already paid it, or an estimated income figure that no longer matches reality. Any mismatch is what you take to HMRC.
How to Get the Code Changed
The fastest route is the Check Your Income Tax service on GOV.UK, reached through your Personal Tax Account or the HMRC app. You can see how the current code is built, update your income details, and often trigger an automatic review and a revised code.12GOV.UK. Check Your Income Tax for the Current Year
If you would rather talk to someone, HMRC’s income tax helpline is 0300 200 3300, or +44 135 535 9022 from outside the UK. It is open Monday to Friday, 8am to 6pm, and closed on bank holidays.13GOV.UK. Income Tax: Enquiries Have your National Insurance number ready, along with the specific figures you want to dispute.
Once HMRC processes the change, they issue a revised P2 and send the new code electronically to your employer or pension provider, who then adjusts your future deductions.8HM Revenue and Customs. PAYE Manual – PAYE11030 – Coding: Codes: How They Are Used and Calculated: P2 Notice of Coding
Getting a Refund if You Overpaid
If part of the year was spent on the wrong code and you paid too much, the money comes back one of two ways. After 5 April, HMRC reviews PAYE records and sends anyone with an over- or underpayment a P800 tax calculation or a Simple Assessment letter setting out the amount and how to claim.14GOV.UK. Tax Overpayments and Underpayments
If the tax year has ended and no letter has arrived, do not assume HMRC will always catch a small overpayment. You can claim yourself through GOV.UK, and the same Check Your Income Tax service also lets you review earlier tax years and ask for a review of what you paid.
Penalties if You Didn’t Tell HMRC About a Change
If your circumstances change in a way that affects your tax and you fail to tell HMRC, penalties can apply. HMRC bands them by behaviour:
- Lack of reasonable care: 0% to 30% of the extra tax owed.
- Deliberate error: 20% to 70% of the extra tax owed.
- Deliberate and concealed: 30% to 100% of the extra tax owed.
Where you land inside each band depends on the quality of your disclosure. Telling HMRC before they come looking (an unprompted disclosure) always attracts a lower penalty than telling them after.15GOV.UK. Penalties: An Overview for Agents and Advisers
No penalty applies if you had a reasonable excuse, the failure was not deliberate, and you notified HMRC without unreasonable delay once the excuse ended. What counts as reasonable depends on your circumstances, including health and personal issues.16HM Revenue and Customs. Compliance Checks – Penalties for Failure to Notify – CC/FS11 In practice, someone who simply did not realise their code was wrong usually faces no penalty. The higher percentages are for people who knew their income had changed and sat on the information.