What is a D0 Tax Code?
** the 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 D0 Tax Code Mean on Your Payslip?
Everyone in the UK is entitled to earn an amount tax-free every tax year, for 2022-23 this is £12,570, known as the personal allowance.
If you are on a standard tax code and paid monthly, for example, you’ll receive personal allowance of £1,047.50 (£12,570 ÷ 12) each month that you are paid in your payslip and everything above this being taxed according to how much you earn.
If you are on the tax code D0, you won’t receive any personal allowance and you’ll be taxed on all your income at 40%, potentially missing out on the basic rate 20% tax band.
Here’s an example:
You earn a gross monthly salary of £4,500, if you were on the tax code 1257L which is the standard code for most people, you’ll receive a deduction of £1,047.50 before you start paying tax. That means you will pay income tax of £490.50
If instead, you were on the DO tax code, you wouldn’t receive any personal allowance and be taxed at 40% in full so you’ll pay income tax of £1,800.
By being on the D0 tax code instead of the standard tax code, like 1250L, you have paid additional tax of £1,047.34.
|Tax Code D0||Standard Tax Code|
|Income Tax (20%)||£628.33|
|Income Tax (40%)||£1,800.00||£124.33|
|Total income tax||£1,800||£752.66|
Why Are You On the D0 Tax Code?
HMRC issues the D0 tax code to people who have other forms income so are using up their personal allowance and basic rate tax band elsewhere. For example if they are:
- Employed and self-employed
- Have a second job
- Receive a pension
How to Get off the D0 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.
However, if 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.
BR v. D0 Tax Code
The BR and D0 tax codes both give you no personal allowance. But the BR tax code taxes you at the basic (20%) only. Whereas the D0 tax code taxes your salary at the 40% higher rate only.
What Happens if You Haven’t Paid Enough Tax
Once the tax year ends on 5 April, HMRC will check that you have paid the right amount of tax for the year. They will send you a P800 letter & tax calculation if you are owed a tax refund or haven’t paid enough tax. If you owe tax of more than £3,000 you’ll get a simple assessment instead.