What is a BR Tax Code?
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.
Everyone in the UK is entitled to earn an amount tax free every tax year, for 2020/2021 this is £12,500. If you are paid monthly you’ll receive free pay of £1,041.67 each month, which everything above this being taxed according to how much you earn.
|Personal allowance 0%||£12,500||£12,500|
|Basic rate 20%||£12,501 to £50,000||£12,501 to £50,000|
|Higher rate 40%||£50,001 and £150,000||£50,001 and £150,000|
|Additional rate 45%||over £150,000||over £150,000|
You earn a gross monthly salary of £2,500, if you were on the tax code 1250L which is the standard code for most people, 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.
Why Would You Be Given An Emergency Tax Code?
Unless your employer is totally sure they should be giving you the personal allowance, they will put you on BR emergency tax instead
The reason they do this is to stop you benefitting twice, paying too little tax and then getting hit with a big tax bill at a later date.
Although the BR tax code is usually temporary, there are a few reasons you may have one;
The first reason is that your employer does not have details about your previous employment, which would normally be on a P45 or a P46.
The next possible reason is that you have a second job or a pension, meaning you are using your personal allowance is being used up somewhere else
The final reason is that you are going from self-employed to PAYE employment so you are claiming your personal allowance on your tax return or through your salary from your Limited Company, if you have one.
What to Do If You Don’t Think You Should Be on the Basic Rate Tax Code
If you think you have been given the wrong tax code, then firstly speak to your employer and check they have all the right paperwork they need from you. I
f they have, then check with them that your tax code will be changed on your next payslip and you’ll be getting a tax rebate.
If not, and there is a problem with your tax code, then 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.
Why is My Tax Code BR When I Only Have One Job?
The most likely reason you’ll be on the BR tax code is that you haven’t provided your P45 or filled out a new starter form (previously known as a P46).
Speak to your employer if you have provided this information or to obtain it as soon as you can. You’ll receive a tax rebate in your next payslip.
What is the Difference Between 0T and BR Tax Codes?
The OT and BR tax codes both give you no personal allowance (tax-free pay). But the OT tax code taxes you at the basic (20%), higher (40%) and additional tax rates (45%) as income increases. Whereas the BR tax code only taxes your salary at the basic rate.
If you only pay tax at the basic rate, there is no difference between the BR and 0T tax codes.
New Here? Learn how to set up the financial side of your business with these guides and resources:
- Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
- Tax Records and Bookkeeping – Understand what tax records you’ll need to keep and how to set up your own bookkeeping system;
- Self Employment Taxes Explained – Learn what taxes you’ll pay, how much and when;
- Invoice Template – Free template and step-by-step guide so you can get paid by your clients.