Why the first payslip from a second job or pension can look wrong

A second income often arrives with a payslip that seems to take too much tax. Usually nothing has gone wrong: the tax code is simply doing a different job from the one on your main income.

A few hours a week in a bakery, a small pension from an old employer: second incomes are common, and so is the surprise on the first payslip. The explanation usually lies in how Income Tax shares one tax-free allowance between several sources of income.

One Personal Allowance, one place

Most people have a Personal Allowance of £12,570 for the 2026/27 tax year, the amount of income they can receive before Income Tax starts. Under the Finance Act 2026 the allowance stays at £12,570 until 5 April 2031.

There is only one allowance, however many jobs or pensions you have. HMRC normally gives all of it to your highest-paid job or pension, through the tax code that employer or provider uses. The other sources then get a code that gives no allowance at all, so tax is taken from the first pound.

In England, Wales and Northern Ireland, income above the allowance is taxed at 20% on the next £37,700, at 40% up to £125,140 and at 45% above that. Scotland sets its own bands, six in all, from 19% to 48%, and Scottish codes start with an S.

What BR, D0 and the other codes mean

GOV.UK lists what each common code means:

• 1257L: the standard code for one job or pension, giving the full £12,570 allowance.
• BR: all income from this job or pension is taxed at the basic rate, 20%.
• D0 and D1: all income from this source is taxed at 40% or 45%, used when your other income already reaches those bands.
• 0T: no allowance is given on this source.
• NT: no tax is taken from this source.
• K codes: income that is not taxed elsewhere is larger than your allowance, so an amount is added to your taxable pay.

A BR code on a second job is therefore usually correct: the allowance has been used on the main job.

When the code fits, and when it does not

The table compares two people, each with a second job paying £9,000 a year on a BR code. The only difference is the size of the main income.

Assumes the £12,570 Personal Allowance, basic rate 20%, no other income and the same codes all year. Person B’s main job uses only £8,000 of the allowance, leaving £4,570 unused.

For Person A the BR code produces exactly the right result. For Person B it does not, because part of the allowance is sitting unused on a job that pays less than £12,570. In that situation HMRC can split the allowance, moving the unused part to the second job.

Emergency codes on a first payment

When an employer or pension provider does not yet have the right details, it uses an emergency tax code. These end in W1, M1 or X, for example 1257L W1. They tax each payment on its own, as if it were the only income in that week or month, instead of looking at the year so far.

GOV.UK says HMRC usually sends the correct code within 35 days. Emergency codes can also appear when the State Pension starts or when a company benefit begins. Once the correct code is in place, any overpayment is normally returned through later pay.

Pensions, and the State Pension in particular

The State Pension is taxable but is paid without tax taken off. Only one of your other pension providers or employers collects the tax due on it, by using a reduced code. With the full new State Pension at £241.30 a week in 2026/27, or £12,547.60 a year, almost all of the allowance is used up by the State Pension alone, so a workplace pension paid alongside it is often taxed from close to the first pound.

A change in State Pension, for example after bereavement, can alter the code on another pension. Our article on what a State Pension can pass on when a partner dies covers when that happens.

Flexible withdrawals from a pension pot are a frequent source of overpaid tax on a first payment. HMRC now runs a single online service for claiming back overpaid tax after flexibly accessing a pension. A first flexible withdrawal can also switch on a lower limit for future pension saving, explained in our guide to the Money Purchase Annual Allowance. Contributions made through salary sacrifice reduce taxable pay before the code is applied.

How to check and correct it

Your tax codes, and which job or pension holds the allowance, are shown in your personal tax account on GOV.UK and in the HMRC app. If a code looks wrong, you can update your details there or contact HMRC, including asking for the allowance to be split between jobs.

After the tax year ends on 5 April, HMRC checks whether the right amount was paid. If not, it sends a P800 calculation showing any refund or underpayment. Untaxed income also feeds into codes: interest is one example, and our article on which tax year fixed-rate bond interest falls into explains how that timing works. Income from selling online is another, covered in what marketplaces now report to HMRC.

Who this matters for, and what to check

This matters most to people with two or more sources of PAYE income: two part-time jobs, a job and a pension, or a pension alongside the State Pension. Useful checks:

• Which source has the 1257L code (or your adjusted code), and whether it is the largest.
• Whether any code ends in W1, M1 or X after a change of job or pension.
• Whether your income from all sources crosses £50,270, the point at which a D0 code may appear.
• Any P800 letter after April.

The Budget on 28 October 2026 announced changes to how some pension income is taxed from April 2027. These are not yet law and are not covered here.

HMRC does not charge for correcting a code, and a refund does not need a third party to arrange it.

The short version

There is one Personal Allowance of £12,570, frozen until April 2031, and it normally sits on your largest job or pension. Other sources are taxed from the first pound under BR, D0 or D1 codes, which is usually correct. It goes wrong when the allowance is left unused on a smaller main income, or when an emergency code is in place, and both are visible in your personal tax account.