Claim My Tax Back | A Simple Guide To UK Emergency Tax Codes

With an emergency tax code, you must pay tax on any income over the basic Personal Allowance. Alternatively, depending on the information available, you may be taxed at the basic rate (20%) or the higher rate (40%) of tax on your full pay packet in certain unusual situations.

When you start a new job and your proper tax code is unavailable, your employer will normally use an emergency tax code.

Other reasons you could be on an emergency tax code are:

• After being self-employed, you have begun a new work for an employer.

• You have started or stopped receiving employment perks.

• You get taxable government perks.

• You claim a marital allowance or costs for which you get tax relief.

• It's simply designed to be a stopgap fix until the IRS delivers you and your employer the accurate tax code. Your tax code may be found on any of your pay stubs.

• What Does the Emergency Tax Code Mean on a Cumulative Basis?

Tax codes that add up (e.g. 1257L)

The majority of persons are subject to a cumulative tax law. A cumulative code may be identified since it does not contain 'W1' or 'M1'. It indicates that your tax is determined based on your total year-to-date earnings.

• The tax owed on each payment is calculated after deducting whatever tax you've previously paid this year and the amount of your cumulative tax-free personal allowance that has been spent. In other words, it considers the whole picture.

• This offers the benefit of carrying over any unused allocation to subsequent weeks.

• This might happen if you have a pay gap, if you start working part-way through the tax year, or if your wages are less than your allowance.

What Does M1/W1 Mean on My Tax Code?

M1/W1 tax codes are non-cumulative tax codes.

If you see W1 or M1 next to your tax code, it signifies your tax is only assessed on your earnings for that specific pay period.

The tax payable on each payment is calculated without regard to how much tax you've already paid this year or how much of your personal allowance you've utilised. In other words, it just looks at one aspect of that time period.

This has the downside of not carrying over any unused limit to subsequent pay periods, which may result in you paying too much tax.

What Is the Tax Difference Between a Cumulative Tax Code and a Non-Cumulative Tax Code?

Here's an illustration of the difference between Cumulative Tax Code and Non-Cumulative Tax Code:

Dave receives a weekly salary of £300. He works Weeks 1 and 2 of the tax year, but not Weeks 3 and 4. When he returns to work in Week 5, how much tax will he pay?

This will be determined by whether he is subject to a cumulative or non-cumulative tax law.

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

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

In week two, his YTD gross earnings would be £600, and his total tax-free allowance would be £484. However, the tax owed would still be £11.60 since one week's tax-free allowance of £242 applies to one week's wage of £300.

Because Dave is not working in weeks three and four, his weekly tax-free allowance is carried over for both weeks. Dave's YTD earnings are £900 when he returns to work in week five, but since the tax-free allowance has carried over, this sum has increased to £1210. Dave pays no tax in week five and gets a £23.20 refund for the tax paid up to that time since his gross earnings are less than the tax-free limit.

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

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

Dave does not work in weeks three or four, but the tax is computed the same manner in week five as it is in weeks one and two, so instead of paying no tax and getting a refund, Dave pays the same £11.60 tax.

*The weekly tax-free allowance is determined by dividing £12,570 by 52. (weeks in the year). The tax owing is computed as 20% of gross salary less the tax-free allowance. These statistics do not apply to Scots, but the idea remains the same.

How Do I Determine If I've Been Placed On An Emergency Tax Code?

Your tax code will be printed on your payslip, usually alongside your national insurance number.

Your payslip will indicate the following if you are on an emergency tax code:

• 1257 W1

• 1257 M1

• 1257 X

The rates you pay on an emergency tax code are often substantially higher than your regular tax payment, so the amount you expected to be paid may vary significantly from what you get.

How Long Will I Be Subject to the Emergency Tax Code? Is it possible to get rid of this code?

Emergency tax laws are only in effect for a limited time. When you or your employer provide HMRC with your proper information, they will generally amend your tax code. If your changed circumstances result in you not paying the proper amount of tax, you will remain on the emergency tax code until you have paid the correct amount of tax for the year.

You get tax refunds when you pay more assessments to your state government or the federal government, through finance retaining, for instance than your real duty obligation. For this situation, the government will write you a check for the sum overpa