An emergency tax code, the BR tax code often causes confusion, even concern. However, the term “emergency” is perhaps too strong for a tax code that is commonly used – and it shouldn’t raise alarm if managed appropriately.

In this short guide, we answer the question “what is a BR tax code?” and provide some helpful supporting information.

What is a BR tax code?

BR stands for basic rate, which is currently 20% in the UK.

This means you will pay 20% on the source of income with a Basic Rate tax code. This sounds pretty normal, right?

Not quite. The BR tax code doesn’t account for the £12,500 tax-free personal allowance; this means you may be paying more tax than you should.

Essentially, rather than paying tax on earnings over £12,500, you’re paying tax on every penny you earn from that source of income.

Why have I got a BR tax code?

Commonly, HMRC will use a BR tax code when they lack sufficient information (such as that included on a P45) to identify how much tax you should pay. While they lack these details, they’ll continue to be taxing you at this rate.

You may also have a Basic Rate tax code if you’re moving from self-employment back to PAYE, or if you’ve begun your first job.

If you have multiple sources of income, like a state or private pension, you may also encounter this tax code.

Note: each source of income will have a separate tax code.

Other emergency tax codes

As mentioned above, multiple sources of income mean multiple codes. There are other emergency tax codes to be aware of. Some of the most frequently used are:

  • 1250 W1
  • 1250 M1
  • OT

If you aren’t sure where to find your tax code, check next to your national insurance number on your payslip.

While we’re focusing on the BR tax code today, you can find more information on the others from HMRC.

Dealing with an incorrect BR tax code

There are several scenarios when you might receive a Basic Rate tax code – and it may happen incorrectly. This is particularly true if HMRC are using the code due to lack of information.

If you’ve been incorrectly given a BR tax code, it’s important to get this changed. The longer you wait, the more tax you’re going to be paying. You can contact HMRC here.

However, if you’ve had an incorrect BR tax code for any of the previous four tax years, you could be owed a rebate by HMRC.

To update your tax code, simply provide your employer with your P45 or a completed P46. Then, you’ll recoup the overpayment of tax via your salary.

If the BR tax code relates to other sources of income, you may prefer to discuss it with an expert.

In summary

We’ve looked at what the BR tax code is, and with luck you’ll be feeling reassured that if you are overpaying, it can be simply resolved.

For more information on this topic, or simply to find out how you can better manage your tax affairs, call today to book a no-obligation chat with one of our friendly Chartered Tax Advisors.