What is a D1 Tax Code?
A D1 tax code means that all the income from your current employment or pension is taxed in full at the additional rate of 45%.
HMRC assign a tax code for each job you undertake under the pay as you arn (PAYE) system making it crucial to monitor them closely.
Whenever there’s an adjustment in your tax code(s) HMRC modifies the annual income tax you’re liable to pay.
For this reason it’s important to check that your D1 tax code is correct along with any other tax codes you have.
Why have I got a D1 tax code?
Firstly you need to be an addtional rate taxpayer which means you have taxable income of over £125,140 annually (previously £150,000).
Code D1 is usually issued if you have more than one job or pension and all of your allowances have already been used against your main job or pension.
If you have more than one job or pension then any available personal allowance is typically incorporated into your main income calculations, leaving other income that falls into the additional rate tax bracket to be taxed at 45%.
The D1 tax code is different to the D0 tax code which is used in a similar way for higher rate taxpayers.
How do I check my D1 tax code?
The D1 tax code is issued by HMRC depending on your set of circumstances. It’s important to make sure it is applied correctly because you can overpay or underpay if it is not.
Checking your D1 tax code online by using (or creating) your personal tax account or HMRC app is a good place to start.
Your tax code information for all of your income sources should be shown so you can check it for accuracy and there’s a check your current tax code option as well.
As an addtional rate taxpayer you may have to complete a self assessment tax return which will give you a breakdown of the tax owed from all of your income sources.
Your self assessment tax calculations can give you a solid indication if the D1 tax code is being used appropriately moving forward.
D1 tax code and your personal allowance
The tax free personal allowance reduces your taxable and for most people is worth around £12,570 per tax year.
If you have income that deducts tax on the D1 tax code basis you have no tax free allowance and will pay at the addtional rate of tax only.
For other PAYE income that uses a standard tax code of 1257L you will initially receive the personal allowance but for every £2 earned above £100,000 your tax free personal allowance is reduced by £1 until you have zero personal allowance left.
Tax rates and bands can change in each tax year so it’s worth taking note of any additional rate tax announcements from the government in the future.
How do I change my D1 tax code?
If you think you need to change your tax code you need to get in touch with HMRC. Sometimes HMRC needs you to help them by letting them know about changes in your circumstances that can effect your personal tax allowances and tax code.
If you’ve paid too much income tax HMRC can repay you after your tax code has been updated and backdate a refund for the last four tax years if necessary.
On the flip side if you should have a D1 tax code and you don’t the liklihood is you won’t pay enough tax and could be facing a hefty tax bill in the future.
