What is an Emergency Tax Code?

An emergency tax code is used because your correct tax code is not available.

Having an accurate tax code is important because it tells your employer or pension provider how much tax to deduct.

Emergency tax codes are only meant to be a temporary measure and only used until HMRC (the tax office) have the right information so they can send you and your employer the right tax code.

The use of an emergency tax code can mean you don’t receive any tax free personal allowance on the income that the emergency code is used against.

Having no personal allowance means that the emergency tax deducted can be substantial and really affect your take home pay.

The good news is you can change your emergency tax code and be reimbursed your emergency tax as a refund from HMRC.

Emergency tax codes

Found on your payslips or in your personal tax account an emergency tax code can be written in different ways using the letters and numbers M1, W1 and X.

Emergency tax code examples include:

  • 1234 M1 (for people paid on a monthly basis).
  • 1234 W1 (for people paid on a weekly basis).
  • 1234L X.
  • On some occasions a BR or OT tax code can be used to collect emergency tax.

The BR and OT tax codes are not always used as an emergency code and instead used in cases where you have more than one form of PAYE income for example.

How much is emergency tax?

How much emergency tax you will have deducted can vary depending on what HMRC knows about you.

In general you may be subject to the standard tax rate of 20%, or a higher rate of 40% and typically you are only taxed on earnings that exceed the personal allowance for that tax year.

One other problem with an emergency tax code is that it doesn’t take into consideration any tax reliefs or tax free allowances that you may be eligible for.

This means you don’t get any benefit from the tax relief or allowances you are entitled to during the period of time you are paying emergency tax.

Why do I have an emergency tax code?

One of the most common reasons for being issued with an emergency tax code is that you’ve started a new job and can’t provide your P45 from your previous employer.

Other reasons why you may be given an emergency tax code include:

  • You’ve changed jobs.
  • You have started a second job.
  • You have started to receive the state pension.
  • You are starting PAYE employment after being self employed.

How do I change my emergency tax code?

The way to change an emergency tax code depends on your circumstances.

The important bit is to check it and act as quickly as you can to avoid paying more income tax than you need to.

Emergency tax because you have started a new job:

If you started a new employer your emergency code should change when you provide your new employer with your P45 (from your last job) or after a starter checklist has been completed.

After the P45 or starter checklist has been processed the tax office will send you and your employer a new tax code.

When your new tax code has been issued your employer can then start using it and this should mean you will start paying the right amount of tax and receive a refund of the emergency tax previously paid.

You shouldn’t need to contact HMRC if the P45 or starter checklist process works correctly.

Emergency tax code for other reasons:

If you have an emergency tax code for a reason other than starting a new job you will need to check your tax code with HMRC.

This will allow HMRC to explain to you why an emergency code is being used against some or all of your PAYE income.

The tax code system isn’t perfect and emergency codes can be used incorrectly. Contacting HMRC will give them the opportunity to update your tax code where necessary and refund any emergency tax owed to you.

How to stop getting emergency taxed without a P45

If you don’t have a P45 to give to your new job you should complete a starter checklist which will let your new employer update their payroll with the information they need.

Doing this should help prevent getting emergency taxed as long as your new employer receives your starter checklist early enough so they have time to use it before your first payment is due.

A starter checklist can be used for your main form of employment or for an additional part time job.

Doing what you can to avoid getting emergency taxed in the first place is always recommended.

If you are starting a new job and have a P45 you should:

  • Hand over your P45 (which is made up of four parts) to your new employer or pension provider.
  • Your previous employer will send part 1 to HMRC when they provide you with the P45, while the remaining parts will be given to you.
  • You should keep part 1A and pass on to your new job parts 2 and 3 as soon as you can.

How to claim back an emergency tax refund

Claiming back an emergency tax refund is not always necessary with HMRC often dealing with it automatically for you.

  • If your tax code is changed during a tax year an emergency tax refund is normally paid back to you in that tax year through your salary.
  • If you have had an emergency tax code in previous tax years, and you have not been refunded you should contact HMRC so they can check your tax record.

When HMRC have reviewed the years any emergency tax refund should be automatically repaid to you via cheque or BACS through your online tax account.

A P800 tax calculation should be sent to you through the post to explain how HMRC have deducted too much tax because of your emergency code.

You should check your emergency tax refund figures on your P800 against your own records to ensure accuracy.

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