Two tiny letters on your payslip, W1 or M1, change how your entire year is taxed. They tell payroll to look at this payday alone, which is exactly why so many people on them overpay.
You start a new job, the first payslip arrives, and the tax looks suspiciously high. Squint at the tax code and you will often find the culprit: a small "W1" or "M1" tagged on the end. Those characters quietly switch off the system that normally keeps your tax fair across the year.
A standard tax code is cumulative: payroll looks at everything you have earned since 6 April and everything you are owed in allowance, then taxes the running total correctly. The Week 1 Month 1 basis removes that memory. Each payday is treated as if it were the very first period of the tax year.
On a monthly M1 code in 2025/26, you get exactly one twelfth of the £12,570 Personal Allowance, £1,047.50, applied to that month alone. On a weekly W1 code you get one fifty-second, around £241.73. What you earned or paid in any earlier period simply does not enter the calculation.
The W1/M1 basis works fine if your income is perfectly even and you have used exactly the right amount of allowance up to now. Real life rarely cooperates. If you had a gap between jobs, took unpaid leave, or earned below your allowance earlier in the year, that unused allowance is lost under W1/M1 because the code refuses to look back and apply it.
The reverse can also happen: if you used most of your allowance in a previous job, a fresh W1/M1 slice each month hands you allowance you are not entitled to, risking underpayment. Either way, the figures will not balance on their own, which is the whole point of getting back onto a cumulative basis.
Leah leaves a job in September 2025 having earned £21,000 and used the first six months of her allowance (£6,285). She starts a new role in October on £2,800 a month, but without a P45, so HMRC issues 1257L M1.
From October, payroll gives her £1,047.50 of allowance each month and taxes the rest, ignoring the fact that she has already used half her annual allowance against her previous salary. Because the code never reconciles against her real year-to-date position, her tax over the remaining months is calculated in a vacuum and is very likely wrong by year-end.
Once HMRC receives her details and issues a cumulative 1257L, her next payslip recalculates the full year and corrects the balance, refunding any overpayment through payroll. If the year ends first, HMRC reconciles automatically. Use the check my tax code tool to confirm whether you are owed money.
W1 and M1 are not penalties, they are placeholders, and the longer you sit on them the more likely your tax has drifted off course.
The fastest fix is to give your new employer the P45 from your previous job, which carries your year-to-date pay and tax so HMRC can switch you to a cumulative code. If you do not have a P45, complete the new starter checklist and update your details through your Personal Tax Account on gov.uk. Once HMRC issues a cumulative code, your year is reconciled within a pay run or two and any overpaid tax comes back automatically. If the tax year ends while you are still on W1/M1, HMRC works out the difference after 5 April and sends a P800 with any refund.
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