What does the tax code
1240L mean?
1240L means £170 off your allowance. Employers can now tax benefits through payroll instead, and in the year they switch, the same benefit can end up taxed twice.
Check if 1240L is right for you
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Get the detailed breakdown + free reclaim guideThere are two entirely legitimate ways for an employer benefit to be taxed, and for a few years now employers have been moving from the older one to the newer one. In the year they switch, a specific and expensive mistake becomes possible: the same benefit being taxed through both routes at once.
1240L gives £12,400 of tax-free pay, £170 below standard, at a cost of about £34 a year. Small in itself. The reason to read on is what a benefit deduction in your code implies about which route your employer is using.
- 1240L Tax Code
- An ordinary L-suffix code giving £12,400 of tax-free pay for 2026/27, £170 below the standard allowance. The L means normal allowance rules apply. Where the deduction relates to an employer benefit, it indicates the benefit is being taxed through your tax code rather than through payroll.
The two routes, side by side
| Coded benefits (the older route) | Payrolled benefits (the newer route) | |
|---|---|---|
| How the tax is collected | Your allowance is reduced by the benefit value | The benefit value is added to your taxable pay each period |
| What you see | A deduction on your coding notice | A line on your payslip |
| Timing | Based on a figure from an earlier year | Based on the benefit as it happens |
| Year end paperwork | A P11D from your employer | Usually no P11D for payrolled items |
| Accuracy | Lags reality by up to two years | Broadly current |
Payrolling is the better mechanism for almost everyone, because it taxes the benefit in the year you receive it rather than guessing in advance and correcting later. The transition to it is what creates the risk.
The double collection trap
Picture an employer switching to payrolling from April.
Your tax code for the year was built months earlier, based on the P11D for an earlier year, and it already carries a deduction for your medical cover. Nobody removed it, because removing it requires HMRC to be told.
Now your payslip also adds the benefit value to your taxable pay each month. The benefit is being taxed twice: once by the reduced allowance and once by the added pay.
This is not rare, and it does not announce itself. Both mechanisms look completely correct in isolation. The only way to see it is to look at a payslip and a coding notice together.
The check takes a minute. If your payslip shows a taxable benefit line, your tax code should not also carry a deduction for that same benefit. One or the other, never both.
Worked example: 1240L on a £38,000 salary
- Gross salary: £38,000
- Subtract the 1240L allowance: £38,000 minus £12,400 = £25,600 of taxable income
- All within the basic rate band, taxed at 20%
- Income tax for the year: £5,120
- Monthly tax-free pay: £12,400 divided by 12 = £1,033.33
On the standard 1257L code the same salary produces £25,430 taxable and £5,086 of tax. The deduction costs £34 across the year. Income tax only, National Insurance excluded, and an estimate to confirm with HMRC.
If the same £170 benefit were also being payrolled, you would be paying that £34 twice over. At £170 the duplication is trivial; applied to a £6,000 company car it is £1,200 a year, which is why the check matters more than the arithmetic on this page.
What else a £170 deduction can be
Do not assume benefits without reading the notice. At this size the field is wide: a small taxable perk, an estimate of untaxed income such as savings interest, the recovery of a very small underpayment where £170 collects about £34 of debt, a part-year benefit valued proportionately, or the net of a larger addition and a larger deduction.
Our 1152L page covers benefit deductions in detail, 1160L covers underpayment recovery, and 1255L covers income estimates.
What payrolling changes about your year end paperwork
The switch alters which documents you receive, and knowing that helps you work out which route your employer is using without asking anybody.
Under the older, coded route you receive a P11D after the tax year ends, listing the benefits your employer reported. That document is the evidence for checking a coding deduction, because it states what was actually provided and how it was valued.
Under payrolling the benefit value has already been included in your taxable pay throughout the year, so it appears in the pay figure on your P60 and there is generally no P11D for those items. Your employer must still tell you what was payrolled and what it was worth, but it arrives as a statement rather than the familiar form.
Two practical consequences follow.
Your P60 pay figure will look higher. It now includes benefit values as well as cash earnings. That matters when the figure is used for something else: mortgage applications, tax credit or benefit claims, and any calculation where you are asked for your gross pay. The number is correct, but it is not the same thing as your salary, and explaining that to a lender is easier if you were expecting it.
Losing the P11D removes a checking tool. The annual reconciliation between what your employer reported and what HMRC coded no longer happens in the same way, because there is nothing to reconcile. In exchange you get accuracy, since the benefit is taxed as it is provided rather than two years later.
Keep whatever statement your employer gives you about payrolled benefits. It performs the same evidential job as a P11D if a question arises later.
Why coded benefits go stale and payrolled ones do not
The lag is structural rather than a failing of anybody involved.
Your employer reports benefits after the tax year ends. HMRC uses that report to build a code for a year that has already started. So a coded deduction in your 2026/27 code can be based on a benefit as it stood in 2024/25. Two years is long enough for a car to be changed, a policy to be repriced, or a benefit to end entirely.
Payrolling removes the lag by valuing the benefit as it is provided. It is the main reason the mechanism exists, and the main reason a coded benefit deserves a check that a payrolled one does not.
What to do
Look at a payslip and your coding notice together. Confirm the same benefit does not appear in both.
Compare the deduction against your P11D, if you receive one. Where they disagree, the P11D is normally the better evidence. If you no longer receive a P11D, that itself suggests your employer has moved to payrolling, which makes any surviving coding deduction suspect.
Report the position. Sign in to your Personal Tax Account at gov.uk/personal-tax-account, open "Check your Income Tax" and tell HMRC the benefit is being payrolled, or has ended. The Income Tax helpline is 0300 200 3300.
A corrected code applies cumulatively, so anything overpaid during the current year comes back through your next payslip. Earlier years need a separate claim within four years, covered in our guide to reclaiming overpaid tax.
Our free tax code checker will estimate your correct code with and without a benefit. It gives an estimate rather than advice.
People also ask
- 1240L gives £12,400 of tax-free pay, £170 below the standard allowance, costing about £34 a year
- Employer benefits can be taxed either through your tax code or through payroll, never both
- In the year an employer switches to payrolling, the same benefit can be taxed twice
- If your payslip shows a taxable benefit line, your code should not also carry a deduction for it
- Coded benefits lag reality by up to two years because employers report them after the year ends
- No longer receiving a P11D usually means your employer has moved to payrolling
- At £170 the duplication is trivial, but the same error on a company car is worth over £1,000 a year
Related tax codes: 1248L tax code | 1152L tax code | 1151L tax code | 757L tax code | 1257L tax code
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