How Your Tax Code and Salary Are Affected When You Change Jobs

You've accepted a new job. Good. But before you settle into the new desk, there's a piece of admin that directly affects how much money you take home: your tax code.

Get it wrong (or more accurately, let HMRC get it wrong) and you could be overtaxed for weeks or months. The money usually comes back eventually, but who wants to lend the government an interest-free loan while waiting?

What your tax code actually does

Your tax code tells your employer how much of your income is tax-free. For most people in 2025/26, that code is 1257L, which means you get £12,570 tax-free before PAYE kicks in.

The number part (1257) represents your tax-free allowance divided by 10. The letter (L) means you get the standard personal allowance with no adjustments.

Your code can differ from 1257L if you:

• Have more than one job
• Receive taxable benefits from your employer (company car, private medical insurance)
• Owe tax from a previous year that HMRC is collecting through your code
• Have other income that reduces your personal allowance

What happens when you switch jobs

When you leave a job, your old employer gives you a P45. This document shows your total pay and tax paid so far in the current tax year.

You hand the P45 to your new employer. They send it to HMRC. HMRC confirms your tax code. Your new employer starts deducting the right amount. That's the clean version.

In practice, things go sideways when:

You don't have a P45. Maybe it's your first job, you've had a career break, or your old employer was slow sending it. Without a P45, your new employer has to use an emergency tax code instead.

Emergency tax usually means the code 1257L W1 or 1257L M1 on your payslip. The "W1" (week 1) or "M1" (month 1) part means your employer calculates tax on each pay period in isolation, ignoring what you've earned earlier in the year. This often results in overtaxing.

HMRC thinks you have two jobs. If the old employer hasn't reported your leaving and the new one has started reporting, HMRC might split your personal allowance between both. That means neither employer gives you the full £12,570 allowance, and your take-home drops.

How much difference does it make?

Say you earn £30,000 and switch jobs mid-year. With the right tax code (1257L), you'd take home about £2,000 a month.

On emergency tax with a M1 code, your first month's pay might drop to around £1,850. That's £150 less, and it keeps happening until HMRC sorts your code out. Over three months on the wrong code, you could be £450 short.

The good news: any overpaid tax gets refunded, usually automatically once HMRC updates your code. But it can take a few pay cycles to come through, and in the meantime you're down the money.

How to avoid problems

Get your P45 before you leave. Don't wait for it to arrive in the post weeks later. Ask your employer when you'll receive it and chase if needed.

Give it to your new employer immediately. The faster they have it, the faster HMRC can confirm the right code.

Check your first payslip. Look for your tax code. If it says anything other than what you expect (1257L for most people), investigate. Common red flags: a W1 or M1 suffix, a BR code (which means all your pay is taxed at basic rate with no personal allowance), or a code you don't recognise.

Log into your HMRC personal tax account. Go to gov.uk/personal-tax-account. You can see the tax code HMRC has on record, check whether they still show your old employer, and update your details if needed.

Call HMRC if something's wrong. The income tax helpline is 0300 200 3300. Have your National Insurance number ready.

Watch out for benefits-in-kind carry-over

If your old job came with a company car, private health insurance, or other taxable benefits, HMRC may have adjusted your tax code to collect tax on those benefits. When you leave that job, the benefits stop, but the adjusted code might follow you to the new employer until HMRC catches up.

Check your coding notice (the letter or online notification from HMRC that explains your tax code) and make sure it reflects your actual current circumstances.

Multiple jobs and side income

If you're keeping a second job or doing freelance work alongside the new role, your tax code gets more complicated. HMRC splits your personal allowance between employers, or removes it entirely from the second job (giving you a BR or D0 code).

Make sure you tell HMRC about all your income sources. If they don't know, your codes will be wrong and you'll either overpay or underpay, with the underpayment resulting in a bill later.

Quick checklist

1. Get your P45 from your old employer
2. Give it to your new employer on day one (or as soon as you have it)
3. Check the tax code on your first payslip
4. Log into your HMRC account and verify your records
5. Call HMRC on 0300 200 3300 if anything looks off
6. Double-check your take-home pay with a salary calculator

Do the admin early. It's boring, but it's the difference between the right pay from month one and chasing a refund for months.

For more detail, see Check your Income Tax for the current year (GOV.UK), Tax codes explained (GOV.UK), and PAYE: Pay As You Earn (HMRC Guide).