Emergency Tax Code

Understand how an emergency tax code works (also known as basic rate, M1 tax code or W1/M1), why it is used and how to get an emergency tax refund.

Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.

What is an emergency tax code?

An emergency tax code is used by an employer when they do not have sufficient information to put you on a standard tax code such as 1257L (previously 1250l).

Tax codes are used by your employer to ensure that you receive the correct amount of personal allowance that you are entitled to. For the tax year 2022-2023 that’s £12,570.

In other words, HMRC lets you earn £12,570 before you start paying income tax from 6 April 2022 to 5 April 2023. If you are paid monthly you’ll be given £1,047.50 (£12,570 ÷ 12) tax-free each month your employer pays you.

2022/20232021/2022
Personal allowance 0%£12,570£12,570
Basic rate 20%£12,570 to £50,270£12,570 to £50,270
Higher rate 40%£50,271 to £150,000£50,271 to £150,000
Additional rate 45%over £150,000over £150,000

Your employer is responsible for giving you your personal allowance on behalf of HMRC. Usually, they will have a tax code or sufficient information from your new starter checklist to tell them how much personal allowance you are entitled to. But sometimes there isn’t sufficient information to help them decide how to tax you, so they put you on emergency tax and this can have implications for the amount of tax you pay. It normally happens if you:

  • start a new job and have not provided a P45
  • begin working for an employer after you’ve stopped self-employment
  • receive company benefits, like a company car
  • receiving the State Pension
emergency tax code
Emergency Tax Explained

Types of emergency tax codes

The main emergency tax codes in use are:

The basic rate code (BR W1/M1)

The tax code BR means basic rate. BR is an emergency tax code and means all your income is being taxed at the basic rate (20%) without any personal allowance being deducted.

Example

You earn a gross monthly salary of £2,500, if you were on the tax code 1250L which was the standard code for most people in 2020/2021, you’ll receive a deduction of £1,041.67 before you start paying tax. That means you will pay income tax of £291.67 ((£2,500 – £1,041.67) x 20%).

If instead, you were on the BR tax code, you wouldn’t receive any free pay meaning you will be taxed on your full gross salary. You’ll pay income tax of £500.

By being on the emergency tax code you have paid additional tax of £208.33.

Tax Code BR

The 0T tax code

The tax code 0T is an emergency tax code and means all your income is being taxed without any personal allowance being deducted.

Example

You earn a gross monthly salary of £4,500, if you were on the tax code 1250L you’ll receive a deduction of £1,041.67 before you start paying tax. That means you will pay income tax of £758.03.

If instead, you were on the 0T tax code, you wouldn’t receive any free pay meaning you will be taxed on your full gross salary. You’ll pay income tax of £1,175.

By being on the emergency tax code you have paid additional tax of £416.97.

The D0 tax code (D0 W1/M1)

The tax code D0 means all your income is being taxed at 40% without any personal allowance being deducted.

Example

You earn a gross monthly salary of £4,500, if you were on the tax code 1250L you’ll receive a deduction of £1,041.67 before you start paying tax. That means you will pay income tax of £758.03.

If instead, you were on the D0 tax code, you wouldn’t receive any free pay and be tax at a flat rate of 40%. You’ll pay income tax of £1,800.

By being on the D0 tax code you have paid additional tax of £1,041.97.

What does a W1/M1 tax code mean?

If you are on the W1/M1 tax code then you are receiving the personal allowance for the week or month that you work for your current employer, but you won’t receive any backlog of personal allowance you may be owed for example because you have not worked anywhere else during the current tax year.

The 1250l W1/M1 tax code means that you’ll receive £1,041.67 of free pay in your paycheck. For the current tax year 2021/2022, this would become 1257l W1/M1 so you’ll receive £1,047.50 of free pay.

You don’t receive any personal allowance for previous tax years under any tax code.

Do you pay more tax on the emergency tax code?

In some circumstances you will pay more tax, that’s because you’ll not be receiving any personal allowance. But the impact of being on an emergency tax code will depend on which one they use.

How to stop being emergency taxed

If you’re being emergency taxed, you should speak to your employer to check they have all the correct information they need. Once they have all this, they should be able to amend your tax code on your behalf in your next payslip.

Unfortunately, your employer may not be able to help you in certain circumstances because they can only act on the information sent to them in the HMRC coding notice. In these cases, you should contact HMRC on 0300 200 3300. Alternatively, you can use the HMRC online checker, by logging into your personal tax account.

How to get an emergency tax refund

You will get an emergency tax refund once your tax code has been changed, where possible through your payslip. Your employer will update the wrong tax code they have used for all your pay and recalculate it for you, refunding you the difference by reducing the tax you have to pay in the month they make the correction.

If your employer isn’t able to help with your emergency tax refund, following the end of the tax year HMRC will calculate your earnings and tax paid. If they find you have under or overpaid, they will issue a P800 letter with details of how much you are owed.

However, if HMRC discovers, for whatever reason, that you have underpaid your tax during the year, they will recalculate your tax and issue you with a P800 if you owe less than £3,000 or a simple assessment if you owe more than £3,000.

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About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek and money nerd helping financial DIY-ers organise their money so they can hit their goals quicker.

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