When I noticed a change in my tax code on my payslip, it immediately caught my attention, especially because my take-home pay had dropped. Seeing my tax code move from 1250L to 1185L was unexpected, as I hadn’t changed jobs, taken on extra work, or knowingly received any new benefits.
After looking into it, I realised this kind of adjustment is fairly common in the UK. A change like this usually means my tax-free personal allowance has been reduced by £650, which results in a larger portion of my income being taxed and explains the lower net pay.
In simple terms, this change means:
- I’m now paying more income tax each month
- HMRC may be correcting underpaid tax, benefits in kind, or multiple income sources
- The adjustment is being spread across the tax year to avoid a lump-sum bill
Understanding why HMRC makes these changes helped me see whether I needed to take action, or simply let the adjustment run its course.
What Does a Tax Code Like 1250L or 1185L Actually Mean?
In the UK tax system, your tax code plays a central role in how HMRC works out how much income tax you pay. It tells your employer how much of your earnings should be tax-free before deductions begin, and even a small change can affect your monthly take-home pay.
Each tax code is made up of a number and a letter, and both parts matter. The number (such as 1250 or 1185) represents your tax-free allowance. To work this out, you simply multiply the number by 10. For example, a code of 1250L gives a £12,500 tax-free allowance, while 1185L gives £11,850.
The letter “L” confirms that you’re entitled to the standard Personal Allowance. For the 2025/26 tax year, this allowance is £12,570, which is reflected in the updated code 1257L.
Tax Code Breakdown
| Tax Code | Tax-Free Allowance | Explanation |
| 1250L | £12,500 | Older standard tax code used in previous years |
| 1185L | £11,850 | Reduced allowance due to HMRC adjustments |
| 1257L | £12,570 | Current standard tax code for 2025/26 |
So, if your tax code has changed from 1250L to 1185L, your tax-free allowance has dropped by £650. For a basic-rate taxpayer, this usually means paying around £130 more tax per year. These changes are commonly applied automatically by HMRC and processed directly through your employer’s payroll system.
How Often Can HMRC Change Your Tax Code?
Many people assume their tax code is set once a year, but in reality, HMRC can change your tax code at any point during the tax year. Tax codes are dynamic and are updated whenever HMRC receives new information about your income or benefits.
This can happen more frequently than people expect. HMRC may update your tax code when your employer reports changes to your pay, when benefits are added or removed, or when HMRC reviews data from a previous tax year.
One HMRC advisor summed it up perfectly in a discussion shared on a UK finance forum:
“Tax codes are constantly adjusted to reflect what we believe someone will earn and owe. It’s not personal – it’s just data being updated.”
While this system is designed to prevent large tax bills at the end of the year, it can feel unsettling when your tax code changes without warning. That’s why it’s always worth reviewing the reason behind the change rather than ignoring it.
Should You Be Concerned If My Tax Code Changes Suddenly?
A sudden tax code change does not automatically mean something is wrong, but it should never be ignored. In most cases, a drop from 1250L to 1185L is simply HMRC adjusting your allowance to collect the correct amount of tax over the year.
However, concern is justified if the change doesn’t reflect your reality. Many people discover that HMRC has relied on estimates, outdated employer data, or benefits that no longer apply.
On forums such as r/UKPersonalFinance, it’s common to see posts from people who noticed a lower tax code despite no obvious changes.
One user wrote:
“Nothing changed in my job, but my code dropped. HMRC had carried forward income from a side project I closed two years ago.”
This is why checking the details behind the tax code change is crucial. Sometimes it’s accurate. Other times, it needs correcting.
Why Has Your Tax Code Changed From 1250L to 1185L?
A tax code change from 1250L to 1185L means your tax-free personal allowance has been reduced by £650, which usually signals that HMRC is collecting additional tax or making adjustments based on new information. This is typically done to ensure the correct amount of tax is collected through your wages or pension via the PAYE system.
Let’s explore the most common reasons, including two less-talked-about causes that can also trigger such changes.
1. Underpaid Tax from a Previous Year
This is one of the most frequent reasons for a lowered tax code. If HMRC determines that you underpaid tax in a previous year, they won’t usually issue a lump-sum bill (unless the amount is significant). Instead, they adjust your current tax code to “code out” the amount you owe.
Let’s break it down:
- If you underpaid £130 in tax, HMRC may reduce your personal allowance by £650, since 20% of £650 is £130.
- This means your tax-free income limit drops from £12,500 (code 1250L) to £11,850 (code 1185L), ensuring the extra tax is deducted gradually over 12 months.
This approach helps avoid unexpected one-time payments, but it can catch you off guard if you’re unaware of the previous underpayment.
2. Benefits in Kind from Your Employer
Not all income comes in the form of wages. If your employer provides non-cash perks like a company car, fuel card, gym membership, or private health insurance, these are known as Benefits in Kind (BiK), and they are taxable.
HMRC reduces your personal allowance by the monetary value of these benefits to collect tax on them via PAYE.
For example:
- If your private medical insurance is valued at £650 annually, HMRC will reduce your personal allowance by £650.
- That change lowers your tax code from 1250L to 1185L, ensuring you pay tax on that benefit throughout the year.
Forum Insight:
“I didn’t realise my company health cover was taxable until my tax code dropped. HMRC had already factored it in.” – contributor on Money Saving Expert forums
Many employees aren’t made fully aware of these implications when accepting benefits, so it’s essential to review your P11D (the form employers issue detailing taxable benefits) at the end of each tax year.
3. Multiple Jobs or Additional Income
If you’ve taken on a second job, receive a private pension, or earn freelance or rental income, HMRC must ensure that the correct total tax is being collected across all income sources.
When your main job receives the full personal allowance (e.g., 1257L), your other sources of income may:
- Be taxed at a flat rate (e.g., BR, D0, or 0T codes)
- Or trigger a reduction in the allowance for your primary income source to compensate
In some cases, instead of assigning different tax codes to each income stream, HMRC simply lowers your personal allowance on your main job (e.g., changing 1250L to 1185L) to reflect tax owed from your side income.
This prevents underpayment at the end of the year but can lead to confusion if you weren’t aware HMRC had combined income estimates from all sources.
4. Correction of Errors or Outdated Records
Sometimes, your tax code is lowered because of errors or outdated assumptions in HMRC’s records. These errors might stem from:
- Unreported benefit changes
- Incorrect employer reports
- Old income estimates from self-employment or previous jobs
- Redundant allowances that no longer apply
For example, if HMRC believes you’re still receiving a benefit you no longer have (like a company car), they may continue taxing you on it, until you notify them. Similarly, if they estimated your side income based on the previous year and you no longer earn it, your tax code may reflect outdated figures.
While these corrections are designed to ensure accuracy going forward, they can feel unexpected and unfair if you’re not informed in advance. Always check your P2 Coding Notice to see if an outdated benefit or income estimate is being wrongly included.
5. State Pension or Taxable Benefits
Many people don’t realise that the State Pension is taxable, even though it’s paid without tax being deducted. Unlike employment income, HMRC cannot collect tax from the State Pension directly, so they adjust your tax code on any other income you receive, such as:
- A private pension
- Part-time work
- Investments or savings
This ensures the total tax owed is collected over the course of the year. For instance, if you receive £6,000 in State Pension, HMRC may reduce your personal allowance on your private pension by that same amount.
So, even if your earnings from employment or private pensions haven’t changed, starting to receive your State Pension may cause your tax code to drop from 1250L to 1185L or even lower.
6. HMRC Estimated Your Income Incorrectly
HMRC often relies on income figures from previous tax years or information submitted by employers to estimate your current earnings, particularly if you do not complete a Self Assessment return. While this approach works in many cases, it can cause issues when your income has changed.
For example, if HMRC records show you earned £40,000 last year, they may assume you are earning a similar amount now. If you have since reduced your hours, changed roles, or taken unpaid leave, that estimate may no longer be accurate. To account for what it believes is higher income, HMRC may reduce your tax-free allowance, resulting in a lower tax code such as 1185L instead of 1250L.
Because these adjustments are automated, they may not reflect your actual circumstances. Contacting HMRC with updated income details can often lead to a corrected tax code being issued quickly.
7. You’re No Longer Eligible for a Tax-Free Allowance Transfer
The Marriage Allowance allows one partner in a couple to transfer up to 10% of their personal allowance to their spouse or civil partner, if they’re eligible.
This is a valuable tax relief, but it only applies when:
- One partner earns less than the personal allowance threshold
- The other is a basic rate taxpayer
- Both have opted in to claim it
If your circumstances have changed (e.g., you or your partner started earning more, you stopped claiming the benefit, or the claim expired), HMRC may remove the transferred allowance from your code.
That removal results in a loss of £1,260 in personal allowance, which translates to an approximately 125-point drop in your tax code.
So if you had Marriage Allowance applied in previous years, your code might have been boosted to 1375L (or similar). If that benefit ends, your code could fall back significantly—perhaps down to 1250L or lower, such as 1185L, depending on other deductions.
How to Find If Your Tax Code Drops from 1250L to 1185L?
Noticing a tax code change, especially from 1250L to 1185L, can feel unsettling, especially when you haven’t made any major changes in your work or financial life. But HMRC usually makes this adjustment for a reason.
Understanding where to look, what to check, and how to respond can help you manage the situation calmly and effectively.
Start by reviewing your PAYE Coding Notice (P2) or checking your HMRC Personal Tax Account. These tools break down your current tax code, including:
- Your tax-free personal allowance
- Any adjustments for benefits (e.g., medical cover, car allowance)
- Untaxed income being collected through PAYE
- Estimates of expected income for the year
- Repayment of underpaid tax from previous years
What Should You Do If You Think My Tax Code Is Wrong?
If you suspect your tax code is incorrect, it’s important not to ignore it. A wrong code can mean either overpaying tax (which delays your income) or underpaying (which leads to future bills). Acting quickly avoids either outcome.
Here’s what you can do:
- Log into your HMRC Personal Tax Account and compare the income they’ve estimated with your real earnings.
- Contact HMRC directly if you spot outdated benefits or jobs that no longer apply.
- Speak with your employer’s payroll team if there are benefit discrepancies, such as a company car being incorrectly reported.
- Keep documents ready, like payslips, P60s, and termination letters from past jobs.
Real-time example:
In 2025, a teacher named Marcus discovered that his tax code had changed to 1185L. Upon checking his coding notice, he realised HMRC had mistakenly included private medical insurance from a previous job. Marcus had left that job a year earlier. He contacted HMRC, provided his P45 and employer details, and within three weeks his code was corrected back to 1257L. His overpaid tax was then refunded in his next payslip.
Being proactive and clear about your earnings or benefits can lead to quick corrections and prevent ongoing overpayments.
Will a Lower Tax Code Affect My Take-Home Pay?
Yes, a lower tax code always impacts your take-home pay, as it reduces your tax-free income threshold. With a tax code of 1250L, you can earn £12,500 tax-free. When that drops to 1185L, only £11,850 is exempt, meaning more of your income is taxed under PAYE.
The actual difference might appear small on a monthly basis, around £11 per month for basic-rate taxpayers, but over a full year, it adds up to £130. For those on higher tax bands, the impact could be greater.
| Tax Code | Allowance | Approx. Extra Tax | Monthly Impact |
| 1250L | £12,500 | £0 | £0 |
| 1185L | £11,850 | £130/year | ~£11/month |
It’s important to factor this into your monthly budget if your financial margins are tight. Even a small drop in net pay can affect your mortgage planning, savings goals, or debt repayments.
How Can You Prevent Tax Code Problems in the Future?
While you can’t prevent all changes to your tax code, especially when HMRC receives automatic updates, there are several steps you can take to minimise mistakes and stay informed:
- Regularly review your tax code on your payslip and Personal Tax Account.
- Report any changes to employment status, benefits, or income as soon as they happen.
- Check benefit statements to ensure values match what’s reported to HMRC.
- Maintain a record of all jobs or self-employment activity across tax years.
Staying engaged with your tax affairs helps avoid unpleasant surprises. Many people only check their tax code when something goes wrong, but reviewing it every few months can spot issues early, especially after changing jobs, receiving bonuses, or starting a side business.
Common Mistakes That Lead to Incorrect Tax Codes
Mistakes in tax codes are more common than people think, and many of them stem from outdated, incomplete, or inaccurate data passed between employers, HMRC, and payroll systems.
Here are some typical errors that result in reduced or incorrect codes:
- Failure to provide a P45 when starting a new job
- Employers misreporting benefits, such as listing a car you no longer use
- Outdated freelance income still being included in forecasts
- Marriage Allowance being applied or removed incorrectly
- HMRC estimating income based on previous years without current updates
- Emergency tax codes being used due to missing income details
The tax system is largely automated, but that also means it depends heavily on the accuracy of information it receives. Double-checking and correcting errors promptly can ensure that you’re taxed fairly.
How to Manage Changes in Your Tax Code?
Once your tax code changes, the goal is to adjust and respond quickly, both administratively and financially. Here’s how to manage the change smoothly:
- Budget for changes in take-home pay, set aside savings where possible
- Adjust recurring expenses like subscriptions or loans if cash flow tightens
- Use HMRC tools like the online tax calculator or code checker
- Monitor your account monthly, especially after job or income changes
- Claim reliefs and allowances you may be entitled to (e.g. work-from-home tax relief, pension contributions)
If you’re ever in doubt, it’s always wise to speak with a qualified accountant or contact HMRC directly. Taking action today can prevent months of over- or under-payment that could impact your finances long-term.
Conclusion
If you’ve been asking why has my tax code changed from 1250L to 1185L, the answer almost always lies in adjustments made by HMRC to collect the right amount of tax. Whether it’s underpaid tax, work benefits, additional income, or a correction of past records, the change is usually intentional and manageable.
By understanding your tax code, checking your notices, and acting quickly if something seems wrong, you can stay in control of your finances and avoid paying more tax than necessary.
Frequently Asked Questions
Can I request HMRC to review my tax code manually?
Yes. You can use your Personal Tax Account or call HMRC to request a review if you believe your tax code is incorrect.
What happens if my employer uses an outdated tax code?
This can lead to under or overpayment of tax. You should notify HMRC immediately so they can send a corrected code to your employer.
Is 1185L a common tax code or something unusual?
It’s less common than 1250L or 1257L and usually indicates a reduction in personal allowance due to specific adjustments.
Could a one-off bonus affect my tax code for the entire year?
Yes. If HMRC overestimates your future income based on a bonus, it may lower your tax code. You can request a correction.
Will I be refunded if I overpay due to a wrong tax code?
Yes. HMRC will automatically refund any overpaid tax at year-end, or sooner if the issue is resolved.
Does a change in working hours impact tax code adjustments?
Potentially, yes. Increased hours may trigger a new income estimate by HMRC, leading to a code change.
Can HMRC change my code without informing me first?
Yes, but they will send a P2 Coding Notice by post or digitally via your Personal Tax Account.
