What is Emergency Tax?

Income tax is charged on most types of income, such as wages and salary from jobs, your profits if you run a business, pensions, rents you receive if you’re a landlord, and interest and dividends from savings and investments. Most people in the UK have a Personal Allowance unless they are in one of the top tax bands.

Normally you will pay 20 percent income tax on all of your taxable earnings, but most people have a personal allowance that is not taxed at all.

The current personal allowance for this tax year is £12,500.

If you earn under £12,500 per year, you do not need to pay any income tax.
If you are a higher rate tax payer this will increase to 40 percnet, and higher in some cases.


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What is emergency tax?

Emergency tax codes are issued when HMRC don’t have enough information about an employee’s income and tax details for a tax year so they can’t issue the correct tax code.

When will employees get an emergency tax code?
Your new employees will get an emergency tax code if you’re not sure which tax code to put them on.

This can happen when you have a new starter, especially if they don’t have a P45, haven’t had a job before or have come from self-employment.

Employees may also be put on an emergency tax code when they start receiving company benefits, or if they’ve started receiving the State Pension but are still working.

How do I know if I am being emergency taxed?

The emergency tax code will be written on your payslip.

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 to what you receive.

Generally, HMRC will adjust your payments as it gathers information about your income, and any incorrect taxes will come back to you in a rebate at the end of the tax year.

An emergency tax code will end with M1 or W1, indicating that your tax is non-cumulative – meaning, your tax will be calculated based on your pay this period, not your overall year-to-date earnings.


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M1 will be applied if you’re paid monthly, while W1 will be used if you’re paid weekly.

If your pay period is non-standard, your tax code might end in an X.
Alternatively, you might be put on an OT tax code as an emergency measure if HMRC has insufficient information about your annual income.

If your tax code starts with 1250, you will be given a tax-free allowance of £12,500, above which you will start paying tax.

This is for basic and higher rate taxpayers.

However, the 1250 tax code does not take into account any backlog of allowance that may be due to you – for example, if you were unemployed for several months.

For this reason, you could miss out on allowances if your tax code is not adjusted.

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