Although receiving an emergency tax shouldn't be concerning, it is important to know why you have one and to correct it if it is incorrect.

Emergency codes are only intended to be used in situations where HMRC lacks sufficient information to determine which code is appropriate for you. You risk paying more tax than you should if you are forced to utilise an emergency code due to the lack of precise and current information.

You could be overpaying and on an emergency code for numerous reasons. Let’s explore the reasons why this could happen and how to claim emergency tax back.

What is Emergency Tax?

Your employer uses an emergency tax code because your correct tax code is not available. It is intended simply as a stopgap measure to be utilised until the tax office sends the appropriate tax code to you and your employer.

When you apply an emergency code, you usually lose any tax-free personal allowance on the income to which the tax code is applied.  Your tax code will be mentioned on your payslip, or you can use your personal tax account to check the code. It is advised that you check the correctness of your tax code, as incorrect codes typically result in excessive income tax payments.

There are different ways to write a tax code using the letters and numbers M1, W1, and X. For example, 1234 M1, 1234 W1, and 1234L X.

A BR tax code may be applied in certain situations. When used as codes for emergency tax, the BR tax codes are not always wrong.  BR stands for Basic Rate and implies all your income from employment is taxed at 20%. The code is typically used provisionally until your employer has all the information required to provide you with a correct tax code and apply the right income tax deductions.

Although the BR code may not be incorrect, it should be verified to ensure that you are not paying excessive income tax. The BR or OT tax code should be used when you have multiple sources of PAYE income to ensure that you don't overpay or underpay income tax.

Availing of accountancy services from reputed accountants will ensure accurate and compliant tax codes, thereby preventing under/overpayment.

Why Do I Have an Emergency Tax Code?

One of the most common causes is that you got a new job and are unable to submit your P45 form from your previous employer. A P45 form is a declaration or certification that details the amount of income tax you have paid this tax year.  Other reasons why you have to pay an emergency tax are:

  • You have switched jobs.
  • You are getting a pension or any other supplemental income.
  • You are getting benefits from the employer, such as a corporate car.
  • You were self-employed before starting PAYE employment.

Emergency Tax Code Tax Rebate

When you have a tax code, you may occasionally pay too much tax. If your tax code is changed during a tax year, any tax you have overpaid will typically be reimbursed in that tax year through your salary.

Should you have previously filed emergency tax under a tax code and have not received a refund, get in touch with HMRC so that they can check your file. After HMRC reviews the years, any tax rebate will be automatically repaid via cheque or BACS through your online tax account.

You should receive a P800 tax calculation via mail explaining why HMRC deducted excess tax due to your emergency code. You must verify the figures on your P800 against your own records to confirm accuracy.

How to Claim Emergency Tax Back?

There are several ways to claim emergency tax. First, if your P800 indicates that you are entitled to a refund, the letter from HMRC should specify how they would reimburse you.

Usually, this is done via a cheque, an online bank transfer, or using your personal tax account. Prior to receiving a refund, make sure the HMRC calculations match your own records in case the payment is wrong. If HMRC sends you an over repayment and you fail to declare it, they might charge you a penalty, and you would have to return the extra money.

If you believe you overpaid taxes for the current tax year 2023–2024 and you haven't received a P800 notification to let you know about it, there’s probably an error with your tax code.

Before the end of the tax year, you must notify HMRC by phone or online using your personal tax account in order to claim emergency tax. The HMRC number is available on GOV.UK. Make sure you have all the necessary information on hand before contacting them, including:

  • Name, address, birth date, and National Insurance number
  • Your pension providers or employers
  • An estimate of your income from each source (including pension income) for the tax year

Writing to HMRC is usually the best option if you want to claim your emergency tax refund for a tax year that has already ended. Make sure to use the address listed on GOV.UK and mark your letter as a "repayment claim."  Your letter must include full personal details and copies of your P45s and P60s if you have them. Indicate in detail why you believe you should be paid back and how you would like to be reimbursed.

The Time it Takes to Claim Emergency Tax

Repayment may take anywhere from five days to eight weeks once HMRC approves your claim. The exact timing will depend on whether you are reclaiming earnings from work or a pension, how you applied, and if any security checks were essential.

How to Avoid Emergency Tax?

 It may not always be possible to avoid being placed on an emergency tax code.  However, you may still reduce the likelihood by making sure HMRC is informed of any changes in your situation as soon as they occur.  Availing of the accountancy services of a reputed accountant can help with managing your money and understanding taxes.

How Can Unicorn Accountants Help You?

A code for emergency tax may result in you paying more tax than necessary. This could happen if you start a new PAYE employment without providing a P45 form from your previous employer to your new employer or for any other reasons mentioned above.

However, you can claim back your emergency tax. Nevertheless, you must address the situation as soon as possible, and for this, especially to claim the tax back, consult an accountant.

Unicorn Accountants, a leading accountant firm in the UK, will offer expert accountancy services guaranteeing correct tax codes and preventing under/overpayment. With us, you can claim back your tax with confidence. Contact us today for customised solutions.