What does the letter X in my Tax Code mean?
The letter X in your tax code means that HMRC has requested that emergency tax should be deducted from your income.
An X code usually serves as a temporary measure because HMRC needs more information to calculate your correct code.
It will appear as part of your tax code in a format like 1234LX and can be found on payslips or pension statement.
The X tax code affects your earnings by applying a basic rate of income tax, without considering your personal allowances or other tax reducing reliefs.
This can lead to either overpaying or underpaying tax which is why verifying the codes accuracy and taking action where necessary is important.
Why do I have an X tax code?
Emergency tax codes are used in a number of situations and usually due to HMRC’s system not having the necessary details to generate a tax code that does not deduct tax at the emergency rate.
An X code can be issued:
- When starting a new job.
- Transitioning from self-employment to employment under PAYE.
- When you start receiving a taxabale benefit from your employer like a company car.
If you have more than one form of PAYE income you might have an X code with one source and a different code with another.
Other emergency tax codes to look out for have the prefixes W1 and M1 and they should be treated with the same attention.
To avoid an emergency code being used for longer than necessary it’s recommended that you either provide your last P45 to your new employer or complete a starter checklist which your employer can provide.
This helps your employer provide HMRC with the information they need to update your tax code in the quickest time.
Do I pay too much tax with an X tax code?
Emergency tax being deducted because of an X code can often mean you will pay too much tax for the length of time you have the code.
Excess income tax usually occurs because the tax deducted might not reflect your full tax free allowances – leading to higher deductions than required.
If you’ve paid too much tax, you’ll normally receive a tax refund once HMRC has all the required information and updated your tax code.
Overpaid tax will either be repaid through your salary during the tax year or it can be paid as a lump sum by BACS transfer or cheque.
Not paying enough tax may happen if the code fails to include all taxable income or benefits, causing lower deductions than necessary.
HMRC will usually look to recoup underpaid tax through your tax code by including the underpayment in the calculation of your code.
Repaying tax this way means you pay back what you owe over time instead of in one lump sum payment.
Example calculation with an X tax code
For an individual earning £30,000 per year with an X tax code for an entire tax year:
- Personal Allowance: £0 (no tax-free allowance).
- Taxable income: £30,000.
- Basic rate tax (20%): £6,000 (20% of £30,000).
- Take-home pay: £24,000 or £2,000 per month (before national insurance deductions are taken).
Who to contact about your tax code
If you see the X code on your payslip, it’s a good idea to check that your tax deductions are accurate.
To check if your tax code is correct, you can contact HMRC through several methods, with digital channels usually providing the fastest response.
The HMRC tax code verification tool and online chat system are available to all users and can help start your tax code review process.
Their telephone helpline for tax inquiries operates on weekdays (Monday to Friday), though you may experience wait times.
Tax Rebate Services offers a free tax refund calculator that estimates potential overpaid PAYE tax refunds from your employment income. Our tool lets you review up to four previous tax years, which is helpful when assessing multiple tax years at the same time.
