What is a D0 Tax Code?
The tax code D0 means all your income is being taxed at 40% 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.
| 2022/2023 | 2021/2022 | |
|---|---|---|
| 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 £150,000 | over £150,000 |
You earn a gross monthly salary of £4,500, 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 £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.
Why Would On a 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.
One of the most common reasons is that someone is employed and self-employed.
What to Do If You Don’t Think You Should Be on 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.
If they have, then check with them that your D0 tax code will be changed on your next payslip and you’ll be getting a tax refund.
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.
What Happens if You Haven’t Paid Enough Tax
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 simple assessment if you owe less than £3,000 or send you a letter if you owe more than £3,000.
