Whether you have just changed jobs, entered into salaried work, or even decided to return to work while on a pension, you may well have placed yourself on an emergency tax code. If you’re not used to seeing this reference pop up on your wage slips, it’s understandable if you’re worried!
However, it’s only usually a temporary measure, and once you know how to get off emergency tax, you’ll be earning your full potential. It’s worth stopping this tax code as soon as possible – and I’ll show you how in this guide.
What is emergency tax?
An emergency tax code is a marker that your employer needs to use if your actual tax code is not available yet. It typically applies a higher rate of tax than you’d normally expect to pay – higher than your allowance set by HM Revenue and Customs for the year.
Emergency tax codes usually arise when you change jobs, receive additional income (from a pension, for example), are starting PAYE employment following a time when you were self-employed, or are simply getting benefits from your current job (such as a company car, for example).
Take a deep breath – it’s not permanent. It’s typically only in place until HMRC can confirm your real tax code, and share such information with your employer.
If you receive emergency tax, you should be able to see the relevant code on your pay slip. The code will be 1257 W1, 1257 M1, or 1257 X. These are subject to change, so always watch your slips!
What to do if you’re on an emergency tax
Thankfully, there are a few things that you can do to get off emergency tax as soon as possible. First of all, it is important to give your new employer the details of your previous income or pension.
If you do not have the previous details, you can submit a P45 form or even a new starter checklist (if you were self-employed). Your tax code should then be updated automatically with the relevant tax department, and you’ll be paying a standard amount on your next wage slip. Phew!
As proof of this update, you should receive a PAYE Coding Notice. HMRC will then inform your employer or pension provider about the change in code, which they will then be able to use to ensure that you are not getting overly taxed.
That said, even with the notification, it is always best to check your payslip once you have been informed of the change. Check your slip carefully, and compare codes between your previous issues.
That goes for if you receive physical slips or digital payment notifications – unfortunately, much of the legwork is down to you at this stage, though thankfully, overturning emergency tax is fairly simple.
Should your new tax code not be on your next payslip, it is important to contact HMRC as soon as possible. Leaving it for too long will mean that you will likely have to pay more in tax again. You may be entitled to a bigger tax refund, but it is important to get on it as soon as possible!
In some cases, HMRC may keep you on emergency tax if you haven’t paid enough for the tax year. This may apply, for example, if you’re withdrawing on a state pension. You may find that a regular tax code won’t apply until the start of the next tax year (beginning April 6th).
Always call or email HMRC if you’re worried about staying on emergency tax, and feel you should be on a standard code.
How to claim emergency tax back from HMRC
If your tax code is changed from emergency to standard during a tax year, then any money you overpaid in tax should automatically be returned to you in the same tax year through your salary. However, in rare cases, you may not receive these refunds as soon as you expect them.
If you think that this may be the case, contact HMRC. Advisors will then check your tax record to see whether or not you have or should have been refunded. Any tax rebates should then be paid to you either via BACS (through your online tax account) or via cheque.
You will then receive a P800 tax calculation via the post. The form will simply explain the error and how HMRC took too much tax due to your emergency code.
Although there should be no errors from there (with any luck!), it is always a good idea to check the information on the P800 and your own information to ensure that HMRC refunds you the full amount you expect.
You can easily contact HMRC using the UK government’s website and follow the steps to your tax refund from there.
How to stop emergency tax from arising
Unfortunately, there’s no single guaranteed way to prevent emergency tax from applying to your PAYE wage slips. It’s good practice to offer employers details on your previous work and earnings as soon as possible, in any case, to offset emergency tax from running on too long.
Emergency tax exists as a ‘safety net’ for HMRC. If they’re unclear on how much they can legally charge you per year, they’ll set you at a higher rate until informed otherwise.
This can be fairly frustrating! However, in most cases, it’s reversible within a few weeks, meaning you won’t have to take the financial hit for long.
What you may have to do, however, is budget carefully for a few weeks until you get your rebate. Slightly irritating, but it’s a facet of PAYE that millions of people deal with.
Taxation is a fact of life in the UK. Whether it’s applying to your salary or bonus, or you’re getting taxed more than you think you should be, help is always at hand.
Speaking of bonuses – have you checked out our guide to how much your bonuses get taxed in the UK? The answer’s actually pretty straightforward – go ahead and take a look.
How long will it take for HMRC to refund emergency tax?
If you’re waiting for your tax refund, then you may want to get comfy and put the kettle on! It can take up to four months for HMRC to refund an emergency tax.
HMRC must first go through the process of ensuring that you have overpaid your tax, then see by how much – and perform administrative checks and measures.
Usually, it can take about 12 weeks to process the refund; then, you can expect to wait anywhere from three days to a month before receiving the money.
You can hire professionals to help you deal with the refund, and they should be able to keep you informed about the current status of the refund. However, as you can imagine, that’s an extra cost to keep in mind.
How long does it take HMRC to change my tax code?
Depending on your circumstances, HMRC may only take a few weeks to change your tax code over. To offset the time it may take, always supply a new employer with a P45, and make sure they have all the details they need to confirm your status with HMRC.
In certain cases, HMRC may keep you on emergency tax until you’ve paid back enough for the tax year in question. You’ll then move over to a standard code at the typical rate for your allowance on April 6th, when the next tax year begins.
Can I get off emergency tax without a P45?
If you do not have, or cannot submit a P45, or even a P46, then you should be able to give your employer the necessary information directly. If you were self-employed and/or not on PAYE previously, you can fill out a new starter pack or checklist to ensure your details are correct.
However, if you fail to inform the relevant people of your status and previous earnings, they must put you on an emergency tax code. Frustrating, but true!
As seen above, this ensures that you can continue to work legally, but it will cost you quite a bit more in tax.
As soon as you can give the necessary information to your employer, do so! You can then apply for a refund from HMRC, with rebates typically paid to you within four months (though potentially much quicker).