PAYE, tax codes and the personal allowance

How cumulative PAYE works

Blankitt HR uses HMRC's standard cumulative method by default.

Each pay period, the calculator:

1. Adds this period's taxable pay to the year-to-date taxable
2. Works out how much personal allowance you've "used up" by this point in the tax year
3. Applies the income-tax bands (20% basic, 40% higher, 45% additional) to anything above allowance
4. Subtracts the tax you've already paid year-to-date — the difference is this period's tax

This is why your tax can look uneven across the year. If you're overpaid in one month, the next month corrects it automatically.

Tax code formats

Code	What it means
1257L	Standard personal allowance (£12,570) — most people
1257L W1 or M1	Same allowance, but each period stands alone (no year-to-date) — emergency code for mid-year starters
BR	All earnings taxed at 20% (basic rate) — usually a second job
D0	All earnings taxed at 40% (higher rate)
D1	All earnings taxed at 45% (additional rate)
0T	No personal allowance — every penny is taxed
NT	No tax — usually for expats
K-codes (e.g. K200)	Negative allowance — used when benefits in kind exceed the standard allowance
S-prefix (e.g. S1257L)	Scottish bands apply
C-prefix (e.g. C1257L)	Welsh bands apply

How to set a tax code

Open the employee detail page > Employment tab > Tax codes > Add tax code.

Each tax code has an effective date. Adding a new code automatically ends the previous one the day before, so you never have two active at the same time.

The £100,000 taper

For earnings above £100,000, the personal allowance reduces by £1 for every £2 you earn over. At £125,140, the allowance is gone entirely.

You don't need to do anything — Blankitt HR handles the taper automatically when year-to-date earnings cross the threshold.

Why W1 or M1 sometimes appears

When someone starts mid-year without a P45 from their previous employer, HMRC's default is to put them on an emergency code: 1257L W1 (weekly) or 1257L M1 (monthly). This stops the cumulative calculation from over-refunding tax they hadn't actually paid yet.

Once HMRC has all the information (typically from their previous employer's RTI submission), they'll issue a coded notice and you swap to the standard cumulative code.

Scotland and Wales

Scottish taxpayers have their own income-tax bands — Starter, Basic, Intermediate, Higher and Top. Welsh taxpayers currently use the same bands as rest-of-UK but are flagged separately for HMRC.

A Scottish or Welsh tax code (S or C prefix) tells Blankitt HR which bands to use. The employee's home address doesn't affect the calculation — only the tax code does.