Tax Code 1145L: Why Your Allowance Dropped by £1,120

Tax code 1145L means HMRC has told your employer or pension provider to give you £11,450 of tax-free pay this year before Income Tax kicks in. That is £1,120 less than the standard Personal Allowance of £12,570, so something specific has pulled your allowance down. The usual suspects are taxable workplace benefits, underpaid tax from an earlier year being collected through your wages, or untaxed income such as the State Pension.¹

Reading the Code

A PAYE tax code is HMRC’s instruction to your employer about how much of your pay to leave untaxed. Multiply the number by ten and you have the annual tax-free amount: 1145 becomes £11,450, just as 1257 becomes £12,570.² The letter L means you get the standard Personal Allowance, even if the number in front of it has been reduced.³

Your employer spreads that £11,450 evenly across your pay periods. Paid monthly, roughly £954 of each month’s pay comes to you tax-free; anything above that is taxed at the applicable rate. Under the standard 1257L the monthly tax-free slice would be about £1,048, so 1145L leaves around £94 more of your monthly pay exposed to tax.

Why HMRC Reduced Your Allowance by £1,120

The standard code for the 2025/26 tax year is 1257L.² Landing on 1145L means £1,120 has been knocked off your allowance for a reason HMRC will have set out in a PAYE coding notice (form P2). Three causes account for most cases.

Taxable workplace benefits. If your employer gives you a company car, private medical insurance, or similar benefits in kind, HMRC collects the tax on their value by shrinking your code rather than sending you a bill. A benefit valued at £1,120 a year would take 1257L down to exactly 1145L.⁴

Underpaid tax from a previous year. If HMRC’s year-end reconciliation shows you owed less than £3,000, they can recover it by lowering your code for the following year and spreading the debt across twelve months of payslips.⁵

Untaxed income, most often the State Pension. The State Pension is taxable but paid gross. HMRC balances the books by reducing the code on your other PAYE income so the correct total tax gets collected.

Less often, the reduction reflects an estimate of untaxed savings interest or rental income HMRC expects you to receive. If none of that fits your situation, HMRC may be working from stale or wrong information, and it’s worth digging into the breakdown.

What 1145L Costs You Compared to 1257L

The extra £1,120 of your pay that is no longer sheltered gets taxed at your marginal rate. For a basic-rate taxpayer at 20%, that’s about £224 a year, or roughly £18.67 a month. A higher-rate taxpayer at 40% pays around £448 a year more than they would on 1257L.⁶

That’s the correct outcome if the reduction genuinely reflects a benefit you receive or tax you owe. If it doesn’t, you are overpaying by that amount every month until the code is corrected, and HMRC will only refund the difference once the record catches up.

Checking the Exact Reason on Your Record

The quickest way to see why your code is 1145L is HMRC’s online “Check your Income Tax” service, which shows your Personal Allowance, every deduction applied to it, and the resulting code for each job or pension.⁷ You’ll need a Government Gateway account, which you can create during sign-in if you don’t already have one; verifying your identity may require a passport or driving licence.

Once you’re in, look for the tax code breakdown. Your standard Personal Allowance sits on one side and each deduction is itemised on the other, with a description: estimated benefit value, underpayment being collected, estimated untaxed income, and so on. If a figure looks wrong, you can update it there.

If you’d rather work from paper, your P2 coding notice contains the same breakdown. HMRC sends it at the start of the tax year and again whenever the code changes.

Fixing a Code That Doesn’t Match Your Circumstances

If a deduction doesn’t apply to you, correct it through the same online service by updating employment income estimates, company benefits, or expenses you’re claiming tax relief on. HMRC will recalculate the code and notify you and your employer within 15 working days. If you’re paid monthly, the new code should show up on your next or the following payslip; weekly-paid employees should see it within three payslips.⁸

A common reason for a code that no longer fits is starting a new job without a P45 from your previous employer. Without it, HMRC and your new employer may be estimating your position. Ask the former employer for the P45 if it never arrived. And if you’ve only recently started the job, HMRC advises waiting 35 working days before contacting them, because new income details take time to reach their systems.⁸

Codes can also change part-way through the year without any action from you: a new company benefit starts, a second job begins, State Pension payments start, or HMRC receives updated figures from your employer. When that happens, your employer’s cumulative PAYE calculation compresses any catch-up into the remaining pay periods, so one month’s tax can look larger than the last. You’ll get a fresh coding notice explaining the change; if a payslip shifts unexpectedly, check the personal tax account before assuming an error.

If You Were on the Wrong Code Last Year

After the tax year closes on 5 April, HMRC compares what you actually earned against what your code assumed. Where they don’t match, you’ll receive a P800 tax calculation (or a Simple Assessment) telling you whether you’re due a refund or owe more.⁹ These letters land between June and March of the following tax year, so there’s a real lag. If you think you overpaid and nothing has arrived, you can claim through your personal tax account rather than waiting.

Underpayments below £3,000 are usually recovered by lowering the next year’s code, which is precisely why many people find themselves on something like 1145L in the first place.⁵ Larger amounts trigger a Simple Assessment requiring direct payment by a set deadline.⁹

Scotland and Wales

If you live in Scotland your code carries an “S” prefix (S1145L) and Scottish rates apply. Welsh taxpayers see a “C” prefix, though Welsh rates currently match those in England and Northern Ireland.⁶ The mechanics of the £1,120 reduction, and the reasons behind it, work the same way; only the tax rates applied above the allowance differ.

1
GOV.UK. Tax Codes – Overview
2
GOV.UK. Understanding Your Employees’ Tax Codes – Overview
3
GOV.UK. What Your Tax Code Means
4
GOV.UK. Tell HMRC About a Change to Your Company Benefits
5
GOV.UK. Pay Your Self Assessment Tax Bill – Through Your Tax Code
6
GOV.UK. Income Tax Rates and Personal Allowances
7
GOV.UK. Check Your Income Tax for the Current Year
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GOV.UK. If You Think Your Tax Code Is Wrong
9
GOV.UK. Tax Overpayments and Underpayments