An Easy Guide To Emergency Tax Codes

An Easy Guide To Emergency Tax Codes

An emergency tax code means you’ll pay tax on all your income above the basic Personal Allowance. Or in some rare cases depending on the information available, you’ll be charged at the basic rate (20%) or higher rate (40%) of tax on your entire pay packet.

An emergency tax code is usually used by your employer when you start a new job because your correct tax code is not available.

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

  • You have started a new job for an employer after being self-employed    
  • You have started or stopped getting benefits from your job  
  • You receive taxable state benefits  
  • You claim marriage allowance or expenses that you get tax relief on.

It’s only meant to be a temporary measure and only used until the tax office sends you and your employer the correct tax code. You can find your tax code on any of your payslips

Cumulative tax codes (e.g. 1257L)

Most people are on a cumulative tax code. You can identify a cumulative code because it does not include ‘W1’ or ‘M1’. It means your tax is calculated on your overall year-to-date earnings.

The tax due on each payment is determined after taking into account any tax you’ve already paid this year and how much of your accumulated tax-free personal allowance has been used. In other words, it looks at the whole picture.

This has the advantage of meaning any unused allowance rolls over to future weeks. 

This could arise after a gap without pay, if you start working part-way through the tax year or when your earnings are lower than your allowance.

What Does M1/W1 On My Tax Code Mean?

Tax codes M1/W1 are non-cumulative tax codes 

If you see W1 or M1 attached to your tax code, it means your tax is calculated only on your earnings in that individual pay period.

The tax due on each payment is determined without taking into account any tax you’ve already paid this year or how much of your personal allowance has been used. In other words, it only looks at an isolated view of that period.

This has the disadvantage of meaning any unused allowance will not roll over to future pay periods, which could result in your paying too much tax.

3. What Is The Difference In Tax Paid If You Are On A Cumulative Tax Code Or A Non-Cumulative Tax Code?

Here’s an example to explain the difference between Cumulative Tax Code and Non-Cumulative Tax Code :

Dave earns £300 gross each week. He works in Weeks 1 and 2 of the tax year, then does not work Weeks 3 and 4. How much tax does he pay when he returns to work in Week 5?

This will depend on whether he’s on a cumulative or non-cumulative tax code.

 

Scenario 1: Cumulative Code (tax is calculated on total earnings for the year-to-date)

In week one, Dave would pay £11.60 in tax based on gross earnings of £300, and a £242 tax-free allowance

In week two, his year-to-date (YTD) gross earnings would be £600, and the cumulative tax-free allowance would be £484. The tax due, however, would still only be £11.60 since one week’s tax-free allowance of £242 applies to one week’s salary of £300.

Dave doesn’t work in weeks three and four, so the weekly tax-free allowance is carried over for both weeks. When Dave next works in week five, his YTD earnings are £900, but since the tax-free allowance has carried over, this now amounts to £1210. Because his gross earnings are lower than the tax-free allowance at this point, Dave pays no tax in week five and receives a rebate of £23.20 for the tax paid up to that point.

Scenario 2: Non-Cumulative Code (tax is calculated only on earnings that week)

In weeks one and two, Dave would pay £11.60 in tax based on gross weekly earnings of £300, and a £242 weekly tax-free allowance.

Dave doesn’t work in weeks three or four, but in week five the tax is calculated in the same way as weeks one and two, so instead of paying no tax and receiving a rebate, Dave pays the same £11.60 tax.

*Weekly tax-free allowance is calculated at £12,570 divided by 52 (weeks in the year). Tax owed is calculated at 20% of the gross pay minus tax-free allowance. These figures do not apply to people living in Scotland, but the principle is the same.

4. How Do I Find Out If I’ve Been Put On An Emergency Tax Code?

Your tax code will be written on your payslip – you can generally find it near your national insurance number. 

If you’re on an emergency tax code your payslip will show:

  • 1257 W1
  • 1257 M1
  • 1257 X

The rates you pay on an emergency tax code are often much higher than your normal tax bill, so the amount you were expecting to be paid may be quite different from what you receive. 

5. How Long Will I Be On An Emergency Tax Code? Is It Possible To Come Off This Code?

Emergency tax codes are temporary. HMRC will usually update your tax code when you or your employer give them your correct details. If your change in circumstances means you have not paid the right amount of tax, you’ll stay on the emergency tax code until you’ve paid the correct tax for the year.

6. How Do I Correct My Emergency Tax Code?

Despite the dramatic name, being on an emergency tax code isn’t something to worry about too much. 

It should be changed for you by HMRC, but there are things you can do to speed it up – namely giving your employer your P45. 

If you don’t have a P45, your employer will ask you to fill in a starter checklist.

If you think your tax code is wrong – for instance, if you’ve been at your new job for more than three months and you’re still paying emergency tax – you can use HMRC’s online Income Tax checker, or call 0300 200 3300. 

If your emergency tax code means you’ve paid too much tax, HMRC will send you a tax rebate.

7. How Can I Claim Tax back if I have an Emergency Tax Code?

If you have paid too much tax when you have had an emergency tax code and your tax code is changed during a tax year to your correct tax code, any tax you have overpaid is normally paid back to you in that tax year. 

If you have had an emergency tax code in previous tax years, and you have not been refunded you should make a tax rebate claim.

To claim tax relief for the current or previous years (you can only claim back up to 4 previous years), you have to make a claim to HMRC, If you do not usually have to complete a tax return, a claim can be made on form P87. There are two versions available from GOV.UK:

  • A P87 you can complete and submit online through the Government Gateway
  • A P87 that you complete on screen but still have to print it off and post it to HMRC. So you need to have your printer and paper on standby!

You cannot save a copy of the form and come back to it partly completed. Make sure you have all information to hand before you start, including:

  • The tax year your claim refers to.
  • Your personal details including address, date of birth, and National Insurance number.
  • Your employer’s details including name, type of business, address, and employer reference number (you will find this on your payslip or P60). 


If you changed jobs during the year, you might need details for all relevant employment. If you do not have the ‘employer industry’ or your ‘employee number’ you should insert ‘unknown’ otherwise you will not be able to progress.

  • Repayment instructions – that is, the bank account which you want it paid directly into (with bank name, address, account name, sort code, account number) or the address you want a cheque to be sent to (you can also have it paid to a nominee).

 

8. How Quickly Can I Get Tax Refund On an Emergency Tax Code?

HMRC usually processes claims in 6-8 weeks, but since the pandemic started back in Jan 2020, this has become longer and longer. Currently, HMRC is taking 16 weeks to deal with tax rebate claims.

9. Is 1257l An Emergency Tax Code

The most common tax code for tax year 2021 to 2022 is 1257L. It’s used for most people with one job and no untaxed income, unpaid tax, or taxable benefits (for example a company car).

 

1257L is an emergency tax code only if followed by ‘W1’, ‘M1’ or ‘X’. Emergency codes can be used if a new employee doesn’t have a P45.

10. Is BR An Emergency Tax Code?

A BR code means that you receive no tax-free personal allowance, so everything you earn will be taxed at 20% (or the basic rate, hence the letters ‘BR’).   

The addition of a ‘W1’ and ‘M1’ indicate that your tax is non-cumulative, either on a weekly or monthly basis. 

The BR code is most often used if you have additional sources of income that have used up your tax-free personal allowance – for example, a second job or a pension.

11. Is OT An Emergency Tax Code?

If your earnings exceed the basic rate tax band, you may get the OT emergency tax code.  

You might also be put on this tax code if your employer does not provide HMRC with the details they need to give you a tax code. 

This will not take any personal allowance into account, so you’ll pay tax according to basic rate, higher rate, and additional rate tax. 

The W and M codes indicate that your tax is calculated for only that pay period, rather than cumulatively.

12. What Is The Emergency Tax Code For Pensions Withdrawals?

In some cases, an emergency tax rate will be charged when you withdraw a taxable lump sum from your pension. This can sometimes be avoided by providing your pension provider with a valid P45 (which documents your earnings for the year) or by asking HMRC to send the provider an up-to-date tax code. 

As pension tax works in the same way as income tax, your pension provider will use the Pay As You Earn (PAYE) system to deduct any tax due before you receive your payment. Under PAYE, any payments you receive will be treated as though they will continue to be paid each month like a regular salary or income.

That means that where it is your first payment, an emergency tax rate will be applied to ensure enough tax is being collected against your predicted total earnings for the year (12x your first withdrawal amount). You’ll also only receive 1/12th of your personal allowance, which is the amount of income everyone is allowed to receive before tax is charged.

 

If your tax code ends in ‘M1’ which stands for ‘Month 1’, you’ll know that your payments are subject to an emergency tax rate pension withdrawal. For most people being placed on pension emergency tax will result in an overpayment of tax which will need to be recouped from HMRC.

At Claim My Tax Back, we ask HMRC to check if you have overpaid tax’s due to an emergency tax code or any other reason over the past 4 tax years as part of the claim process when you apply for any of the tax rebates listed on our website.

Please click the link below to start your application today

UK HMRC Tax Refund Calculators| Claim My Tax Back