What is an emergency tax code?
HMRC may apply an emergency tax code to your salary if it doesn't have enough details about how much tax you need to pay. This means you may miss out on tax-free allowances which would normally benefit you.
The most common time to find you’ve been put on an emergency tax code is when you’ve just started working for a new company.
Other reasons why you might be paying emergency tax include:
- you’ve started a new job for an employer after being self-employed
- you’ve 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.
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, or just on your pay that exceeds the personal allowance - in 2022-23, this is £12,570, the same as in 2021-22.
Emergency tax codes are applied to your salary automatically by HMRC, but only as a temporary measure. Once HMRC has more information about how much you’re earning, your tax code will be adjusted.
- Get a head start on your 2021-22 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.
How do I know if I’ve been put on an emergency tax code?
The emergency tax code will be written on your payslip – you can generally find it near your national insurance number.
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.
Generally, HMRC will adjust your payments as it gathers information about your income. But you may end up paying more tax than you need to, so it's worth checking to make sure your record is correct.
Why does my tax code end in M1 or W1?
Most commonly, 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.
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 X.
Alternatively, you might be put on an OT tax code as an emergency measure if HMRC has insufficient information about your annual income.
What is a 1257 emergency tax code?
If your tax code starts with 1257, you will be given a tax-free allowance of £12,570, above which you will start paying tax.
For most employees, this will be correct, as it is the basic personal allowance and assumes that you are entitled to 1/12 of the allowance each month (1257 M1), (or 1/52 each week – 1257 W1 - if you are paid weekly). 1257 X can apply to either of these.
M1 or W1 additions to your tax codes mean you’re on a non-cumulative tax code.
However, the 1257 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.
What is a BR 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.
What is an OT 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.
- Find out more: understand your tax code - our guide explains the full list of possible tax codes you might spot on your payslip.
How much emergency tax will I be charged?
If you've been given an emergency tax code that excludes the personal allowance, you might miss out on tax relief for £12,570 of your income.
This means you might pay more tax than is necessary. But how much extra will you pay?
- Basic-rate taxpayers (earning up to £50,270) could pay an extra £2,514 in the 2022-23 tax year
- Higher-rate taxpayers (earning up to £100,000) could pay an extra £5,028 in the 2022-23 tax year
Anyone earning more than £100,000 begins to steadily lose the personal allowance by £1 for every £2 they earn above that figure. At £125,000, the personal allowance is lost altogether.
How do I correct my 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.