What Percentage is Emergency Tax

Each year many thousands of people in the UK are put on an emergency tax code. There are a number of reasons why you might be placed on an emergency tax code, for example if your employer was not given a P45 or you have a second job, but whatever reason most people that are put on an emergency tax refund end up overpaying tax.

Tax Rates in the UK

Currently there are four tax brackets:

1. If you earn below £7,475 you rate of tax is 0%. This is also known as your personal allowance.

2. For any amount above the personal allowance between £0 and £37,400 you will pay tax at the basic rate of 20%

3. If you earn over £37,400 you will pay 40% tax

4. And finally if you earn over £150,000 you will pay tax at 50%

 

What Percentage is Emergency Tax

This is one of the most common questions that we get asked. Most people think that the emergency tax rate is higher than 20, 40 or even 50%. However, you may be surprised to find out that emergency tax is only at 20%!

Even though the emergency tax rate might be at 20%, you still usually loose out if you are on it because you do not receive any of your personal tax free allowance.

 

Tax Free Allowance

Most regular tax codes include a number. This number corresponds to your tax free allowance and tells your employer to give you this allowance in each pay cheque. If you are on an emergency tax code you will not receive any of this allowance and can end up overpaying tax by many hundreds of pounds.

If you have been put on an emergency tax code any time in the last 4 years, there is a good chance that you can make a claim with HMRC. We recently wrote an article on how you can claim your emergency tax back. If you have any further questions, please leave them in the comments below.