Emergency Tax

Emergency Tax CodeThe emergency tax is a special tax code that is used by your employer or the company who provides your pension until the HM Revenue and Customs (HMRC) office can properly place you into a taxing bracket.  Emergency tax works by providing for you a basic personal allowance in the form of a small variable amount of tax-free pay. The emergency tax however does not take into account any special circumstances that you may have, nor does it grant any allowances or special entitlements that you may otherwise qualify for.

There are several reasons why you maybe put onto the emergency tax code. For the majority of people who are designated to emergency tax, they have started a new job but their previous employer has not sent a form P45 for that tax year. The second most common reason people are placed on emergency tax code is because they have begun their first job following the start of the taxing year; however, the employee has not been receiving any taxable benefits from a state or a company pension. Additionally, a worker maybe placed onto emergency tax if they were previously self-employed and have begun working at a new job. For a small percentage of workers on emergency tax, they have been placed on emergency tax because of their work history.  If the worker begins a new job and has had one or multiple jobs previously before beginning the new job, the HMRC may give you an emergency tax identifier.

There are different types of emergency tax, there is a “cumulative” emergency tax and there are emergency tax codes called “week 1” and “month 1” codes. What these means is that for a “cumulative” emergency tax code designation, you will have had to tell your employer that you have not worked previously to the start of your new job during the tax year. A “cumulative” emergency tax qualified you for a full personal allowance that is tax-free over the remainder of the tax year. The tax codes called “week 1” and “month 1” are used for situations where your tax code may have been reduced by a large amount, where you have had a different job or have received benefits from the state during that tax year, or even if you have previously used a “week 1” or a “month 1” tax code. In the case of a “week 1” or a “month 1” tax code, the HMRC will ascertain you to have been receiving personal allowances, so any creditable allowances remaining will be allocated over the remaining course of the year.

 

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