The 1138L tax code gives you a tax-free personal allowance of £11,380 for the year, which is £1,190 less than the standard £12,570 most people get under code 1257L. HMRC has reduced your allowance because something in your tax record, usually a taxable work benefit, an underpayment from a previous year, or untaxed income like the State Pension, needs tax collected against it through your payslip.
What the Number and Letter Actually Mean
Every PAYE code follows the same simple formula: take the digits and multiply by ten to find your annual tax-free amount. For 1138L that comes to £11,380. Your employer’s payroll software then divides that figure across your pay periods so the tax-free portion is spread evenly, whether you’re paid weekly or monthly.
The “L” at the end tells your employer you qualify for the standard personal allowance. It’s the most common suffix in the system and applies to most employees with one job and no unusually complex tax arrangements.1GOV.UK. Tax Codes: What Your Tax Code Means The standard allowance of £12,570 produces code 1257L, and that figure is frozen at £12,570 until at least April 2028, with legislation extending the freeze through April 2031.2GOV.UK. Income Tax: Maintaining the Personal Allowance and the Basic Rate Limit So if you’re seeing 1138L, HMRC has deliberately shaved £1,190 off the standard figure.
Why HMRC Has Reduced Your Allowance by £1,190
When HMRC works out that £1,190 of your income needs to be taxed but wouldn’t otherwise be caught through normal payroll deductions, they lower your tax-free allowance so the extra tax comes out gradually with each payslip. It saves them sending you a bill, and it saves you having to find a lump sum. The £1,190 gap between £12,570 and £11,380 is that adjustment in action.3GOV.UK. Understanding Your Employees’ Tax Codes
A few situations commonly produce this kind of reduction:
- Benefits in kind from your employer. If you get perks with a taxable value, such as private medical insurance or a company car, HMRC reduces your allowance to collect tax on those benefits through your pay. Benefits valued at £1,190 would move your code from 1257L to exactly 1138L.4GOV.UK. Income Tax Rates and Personal Allowances
- An underpayment carried over from a previous year. If HMRC’s year-end reconciliation found you paid too little tax last year, they often collect the shortfall by trimming your current code rather than asking for the money outright. The amount owed is spread across 12 months.
- State Pension income. The State Pension is taxable but paid without tax deducted at source. If you also have employment or a private pension, HMRC reduces the code on that other income so the tax owed on your State Pension is collected there instead.
- Small amounts of untaxed savings interest or other investment income that fall outside automatic reporting can also cause HMRC to shave your allowance.
It’s worth knowing that 1138L isn’t a penalty or a red flag. It’s the mechanism HMRC uses to collect tax you owe on income or benefits that aren’t taxed at source, spread thinly across the year.
Your coding notice, form P2, should list the specific adjustments HMRC has made. If you didn’t keep it, you can see the same information by signing in to your Personal Tax Account.
If You See W1, M1, S, or C on the Code
Sometimes 1138L is followed by W1 or M1. These markers mean you’re on an emergency or non-cumulative basis: your employer only looks at that single pay period when calculating tax, rather than your total earnings so far in the year. Under normal cumulative treatment, payroll tracks your year-to-date income and evens things out as the year progresses. On W1 (weekly) or M1 (monthly), each pay period is treated in isolation, as though you earn that amount every period.5GOV.UK. Emergency Tax Codes
Emergency treatment often means overpaying tax early in a new job. Once HMRC has your correct details and issues a cumulative code, your employer should refund the excess through your next payslips. If you’ve just started work and see W1 or M1, check that your new employer has your P45 or that you’ve filled in a starter checklist.
A prefix on the front of the code tells payroll which set of rates to apply. An “S” (making it S1138L) means Scottish income tax rates apply, which run from a 19% starter rate up to a 48% top rate for 2025/26.6GOV.UK. Income Tax in Scotland A “C” prefix means Welsh income tax, which so far remains aligned with the rates for England and Northern Ireland.7GOV.UK. Income Tax in Wales
How to Check the Code Is Right
The fastest way to review your code is through HMRC’s online service or the HMRC app. Once signed in, you can see your current code, check the income and benefit figures HMRC holds for you, and report anything that’s changed.8GOV.UK. Check Your Income Tax for the Current Year You can also update employer and pension provider details through your Personal Tax Account.9GOV.UK. Personal Tax Account: Sign In or Set Up
Compare what HMRC has against your own situation. Ask yourself:
- Do the benefits in kind listed still apply, or have they stopped since HMRC last updated your code?
- Is there an underpayment being collected that you’ve already paid off another way?
- Does the State Pension figure match what you actually receive?
- Are there reliefs you’re entitled to that haven’t been applied, such as a professional subscription to an HMRC-approved body or Marriage Allowance from a spouse?10GOV.UK. Claim Tax Relief for Your Job Expenses: Professional Fees and Subscriptions11GOV.UK. Marriage Allowance: How It Works
If something looks wrong, reporting it through the online service prompts HMRC to review the code. You can also call the income tax helpline on 0300 200 3300, or +44 135 535 9022 from outside the UK.12GOV.UK. Income Tax: Enquiries After the review, HMRC issues a fresh P2 to you and sends an electronic update to your employer, who applies the new code from the next available pay period.
What Happens at the End of the Tax Year
Even a code that was accurate when issued can drift out of line as the year goes on. After each tax year ends in April, HMRC runs an automatic reconciliation comparing what you actually earned against what your code assumed. If those figures don’t match, you’ll get a tax calculation letter called a P800, usually sent between June and March of the following year.13GOV.UK. Tax Overpayments and Underpayments
If the P800 says you’ve overpaid, how you get the money back depends on what the letter tells you. Some let you claim online by bank transfer, which takes around five working days. Others say a cheque will arrive within 14 days automatically. You can also claim through your Personal Tax Account or the HMRC app if you have a UK bank account.14GOV.UK. If Your Tax Calculation Letter (P800) Says You’re Due a Refund Since mid-2024, HMRC has stepped back from issuing all repayments automatically, so read the letter carefully and follow whatever it tells you to do.
If the P800 shows an underpayment, HMRC will usually collect the shortfall by adjusting next year’s code rather than demanding immediate payment. That is one of the main reasons someone ends up on a code like 1138L in the first place.