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What the OT Tax Code Means (+ How it Affects the Tax You Pay)

What Is the OT Tax Code?

The tax code OT (or S0T if your in Scotland) is an emergency tax code in the UK. This tax code means all the income in your payslip is being taxed without any tax free personal allowance** being deducted.

** the tax free personal allowance is £12,570 for the 2023-24 tax year

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 Does the OT Tax Code Mean?

For the 2023-24 tax year, there is a tax free personal allowance of £12,570. If you are paid monthly, for example, and have the standard tax code the first £1,047.50 (£12,570 ÷ 12) of your income is tax-free and you’ll start to pay tax on everything over this amount, depending on the tax bands your income falls into.

If you are on the OT W1/M1 tax code you’ll start paying tax on your income without any tax free personal allowance being deducted before working out how much income tax you’ll pay. For this reason, it is a type of non-cumulative tax code.

60% tax trap
UK Tax Brackets

Here’s an Example of the 0T W1/M1 Tax Code

You earn a gross monthly salary of £4,500 and you have been put on the 0T tax code for the 2023-24 tax year. You won’t receive any tax free personal allowance when you are paid, so you’ll pay income tax of £1,171.37.

If you were taken off the emergency tax code and put on a standard tax code, you’d pay income tax of £752.37 instead. A tax saving of £419.

0T Tax CodeStandard Tax Code
Gross Pay£4,500.00£4,500.00
Personal Allowance£0.00(£1,047.50)
Taxable Pay£4,500.00£3,452.50
Basic Rate Income Tax @ 20%£628.33£628.33
Higher Rate Income Tax @ 40%£543.33£124.33
Total Income Tax£1,171.67£752.67

Why Are You On the OT Tax Code?

Unless your employer is totally sure they should be giving you the personal allowance, they will put you on the OT emergency tax code instead when they work out how much income tax you’ll pay. The reason they do this is to stop you from benefitting twice from the personal allowance, paying too little tax and then getting hit with a big tax bill at a later date.

Although the OT tax code is usually temporary, there are a few reasons you may have one including;

  • You have started a new job and your new employer does not have details about your previous employment. This would normally be on a P45 or starter checklist (previously known as a P46).
  • You have a second job or a pension. This would mean you are using your personal allowance is being used up somewhere else
  • You’re going from self-employed to PAYE employment. Therefore, you are claiming your personal allowance on your tax return or through your salary from your Limited Company.

How to Get an OT Tax Refund

If you think you have been given the incorrect tax code, then first speak to your employer. You should check they have all the right paperwork they need from you or HMRC to put you on the correct tax code. Once they have confirmed they have everything then check with them that your 0T tax code will be changed on your next payslip and that you’ll be getting a tax rebate.

Tax codes are dealt with by HMRC, not your employer to help keep things confidential. If you are not on the correct tax code and you’re employer is waiting for an updated code contact HMRC by phone on 0300 200 3300. Alternatively, you can use their income tax service online by logging into (or setting up) your personal tax account to notify them that you believe you are on the wrong tax code.

If you do not change your tax code, once the tax year ends, the tax office check that you have paid enough tax based on the records they hold on your income for previous tax year.

If you are owed a tax rebate or owe tax of up to £3,000, they will send you a P800 letter with details of what has happened. If you owe more than £3,000 they will issue you with a simple assessment

What is the Difference Between OT and BR Tax Codes?

The OT and BR tax codes both mean you receive no tax free personal allowance. The BR tax code only taxes your salary at the basic rate. Whereas the 0T tax code taxes you at the basic rate (20%), higher rate (40%) and additional tax rate bracket (45%) as income increases.
If you only pay tax at the basic rate, there is no difference between the OT and BR tax codes.

How Long Does the OT Tax Code Last?

You’ll remain on the 0T tax code until the end of the tax year unless you call the tax office and ask them to update your details so you are on the correct tax code.

Can I Claim OT Tax Back?

You’ll receive any overpaid emergency tax back once you have changed your tax code. If your tax code changes during the tax year, your employer will give you a tax rebate through your payslip. Once the tax year has ended the tax office will work out whether you have paid the right amount of income tax and send you your tax rebate.