What is an emergency tax code?

Everything you need to know about emergency tax codes and what to do if you have one

There’s nothing worse is there? You start a new job, get your first payslip and there it is – emergency tax code! Suddenly you are filled with dread – you just know that your bank account is going to be feeling particularly empty, thanks to that code. But maybe you don’t know what an emergency tax code is or why you end up with one so let DSR Tax Claims explain it all for you. After all, we are tax experts who know everything there is to know about matters of taxation. And if you get to the end of this guide and you still have questions then give our friendly team a call on 0330 122 9972 and let us help.

What is an emergency tax code?

When you leave a job, your employer should give you a P45 form. Your P45 will show how much you have earned and how much tax you have paid in this current tax year, as well as the current tax code you are using. This is all information that your new employer needs to know to ensure that you continue to be taxed at the appropriate rate of tax. Unfortunately, if you don’t get a P45 or if you fail to pass your P45 to your new employer, your new employer will have to use an emergency tax code until they can find out from HMRC which tax code you should be using. And an emergency tax code usually means one thing – you will be paying a higher rate of tax than you are used to!

How an emergency tax code will affect you

Because a new employer probably doesn’t know about any of your personal circumstances, the emergency code assumes you are only entitled to the basic personal allowance. So, it will probably be 1150 W1, 1150 M1 or 1150 X. If you are entitled to any other tax code allowances or reductions, these will not be applied to your salary.

This might sound as though it isn’t much of a problem but unfortunately, emergency tax codes can tax your wages up to 50%. Due to HMRC guidelines it can’t be more than 50% in any one month but that is little consolation when your bank account is so empty it starts to gather tumbleweed! PAYE is calculated on a “cumulative basis”. The reason you may be taxed at such a high level is that your P45 gives details of how much tax you have already paid this tax year and without that information, your new employer has to tax you as though you haven’t paid any tax at all that tax year.

What does it mean if you have a BR Code?

A BR tax code basically means that all of your income is being taxed at 20% and that you aren’t getting your personal tax allowance. Now this might be a legitimate code. Maybe this is a second job so all of your income for this job is subject to tax, because a personal allowance can only be applied to one job. But there might be other reasons for it – it might be because you haven’t given your new employer your P45 or P46 or maybe you are just coming back under the PAYE umbrella after being self-employed. If you think you shouldn’t have a BR code, give our team a call on 0330 122 9972 and we will sort that for you.

So what should you do if you have an emergency tax code?

Prevention is always better than a cure so if you are given a P45 from your old employer, make sure you pass it on to your new employer as soon as possible. But if it’s too late for all of that and you have realised that you are being taxed on an emergency code, give DSR Tax Claims a call on 0330 122 9972 and we can sort things out with the HMRC on your behalf.

And if you have been taxed too much, DSR Tax Claims can help you claim that money back so give us a call on 0330 122 9972 and get your maximum refund fast!

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