Tax code 1240L means your tax-free Personal Allowance for the year is £12,400. That’s £170 less than the £12,570 most people get under the standard code 1257L, and the gap exists because HMRC has adjusted your code to collect a small amount of extra tax through your payroll. The letter L confirms you’re entitled to a Personal Allowance; the number 1240 tells your employer how much of that allowance to give you.
How the Number and Letter Work
Every PAYE code has a number and a letter. Multiply the number by ten to get your tax-free amount for the year: 1240 × 10 = £12,400. The L suffix is the most common one and simply means you qualify for the standard Personal Allowance.1GOV.UK. What Your Tax Code Means
The catch is that “L” doesn’t mean you’re getting the full £12,570. It only confirms you qualify for a Personal Allowance in the first place. HMRC starts with the full allowance, subtracts any income you haven’t paid tax on or any amounts they need to recover, and drops the last digit to produce the number in your code.1GOV.UK. What Your Tax Code Means With 1240L, that calculation has trimmed £170 off the standard figure.
Why You’re on 1240L Instead of 1257L
The £170 reduction almost always traces back to one of a handful of causes. Your coding notice from HMRC (form P2, if you received one) should spell out which one applies to you, but the usual culprits are:
- Taxable benefits from your employer. Perks like a company car or fuel for private use are reported on form P11D and treated as untaxed income. HMRC reduces your code to collect the tax through your regular pay rather than sending a separate bill.2GOV.UK. Expenses and Benefits: Company Cars and Fuel – What To Report and Pay
- Underpaid tax from a previous year. If you didn’t pay quite enough tax last year, HMRC often spreads the recovery across the current year by lowering your code. For smaller amounts this is easier to absorb than a lump-sum demand.
- Untaxed income. Savings interest above your allowance, rental income, or part-time earnings that aren’t taxed at source can all reduce your code on your main employment.
- State Pension. The State Pension is taxable but paid without tax deducted. If you receive it alongside employment income, HMRC usually shrinks your employment code to collect the tax owed on the pension.
A £170 reduction is modest, which points toward a small underpayment being clawed back or a low-value benefit in kind rather than something like a company car (which typically drives the number much lower).
What 1240L Costs You Compared to 1257L
Your employer splits your tax-free amount evenly across pay periods. On 1240L, roughly £1,033 of each month’s pay escapes income tax (£12,400 ÷ 12), or about £238 a week (£12,400 ÷ 52). Everything above that is taxed at the rate for your income band. For 2026/27 in England and Northern Ireland, that’s 20% up to £50,270, 40% up to £125,140, and 45% above.3GOV.UK. Income Tax Rates and Personal Allowances
In cash terms, the £170 reduction in allowance means about £34 more tax over the year for a basic-rate taxpayer (£170 × 20%) or around £68 for a higher-rate taxpayer (£170 × 40%). Small per payslip, but it’s real money, and it’s worth making sure the reduction reflects your actual circumstances.
If You Live in Scotland or Wales
If your code starts with an S (S1240L), you’re taxed at Scottish rates. If it starts with a C (C1240L), you’re on Welsh rates. The prefix doesn’t change the £12,400 allowance itself, only which set of rates applies to income above it.1GOV.UK. What Your Tax Code Means Scotland uses six bands for 2026/27, running from a 19% starter rate on the first slice of taxable income up to a 48% top rate above £125,140.4Scottish Government. Scottish Income Tax 2026 to 2027: Technical Factsheet Welsh rates currently match those in England and Northern Ireland.
Checking Whether 1240L Is Right for You
Before you challenge the code, pull together the documents that show what HMRC is basing it on:
- Your most recent payslip, which shows the code your employer is using and their PAYE reference.
- Your P60, issued after each tax year ends (by 31 May), summarising your pay and tax for the year.5GOV.UK. Payroll: Annual Reporting and Tasks – Give Employees a P60
- Your P45 from any previous job in the current tax year.6GOV.UK. Your P45, P60 and P11D Form
- Your P11D if your employer provides taxable benefits.2GOV.UK. Expenses and Benefits: Company Cars and Fuel – What To Report and Pay
Compare what HMRC has recorded against your actual situation. If you no longer have the company benefit, if your untaxed savings interest has fallen, or if the underpayment being recovered doesn’t ring a bell, the code is a candidate for correction.
Fixing the Code and Reclaiming Any Overpayment
The fastest way to check or change your code is HMRC’s “Check your Income Tax” online service, where you can view your current code, update your income details, and report changes.7GOV.UK. Check Your Income Tax for the Current Year You’ll sign in with a Government Gateway account or GOV.UK One Login.
For anything more involved, such as a disputed benefit valuation or conflicting codes across two jobs, call the Income Tax helpline on 0300 200 3300.8GOV.UK. Get Help From HMRC if You Need Extra Support Once HMRC processes the change, they issue a revised coding notice to your employer, and any tax you overpaid under the old code is refunded through your next few pay packets.
If the tax year has already ended, HMRC checks whether you paid the right amount and, if you’ve overpaid, sends a P800 tax calculation letter setting out how much you’re owed. Where the letter says you can claim online, the refund usually reaches your bank within five working days. If it says a cheque will be sent automatically, allow 14 days. Requesting a cheque through the online service takes around six weeks, and if you’re owed money across more than one tax year, HMRC sends a single cheque for the total.9GOV.UK. Tax Overpayments and Underpayments – If You’re Due a Refund
It works the other way too. If HMRC finds you’ve underpaid, they’ll usually collect by trimming your code the following year, which is often how someone ends up on 1240L in the first place. Larger underpayments come as a Simple Assessment, paid directly rather than through payroll.