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What is a BR Tax Code and Why Have I Got One?
Tax codes play a crucial role in determining how much income tax you pay in the UK. One of the most common codes that may raise concerns is the BR tax code. But what exactly is it, and why might you find it on your payslip? This article will break down the BR tax code, explain why you might have it, and how it affects your earnings.
Understanding the BR Tax Code
The BR tax code stands for “Basic Rate”. If you see this code on your payslip, it means that your income is being taxed at a basic rate without considering your allowance. Typically, personal allowance refers to the amount you can earn before you start paying tax. For the 2024/25 tax year, this is £12,570. If you’re on a BR tax code, you’re taxed at 20% on all your income from the first penny you earn.
What Does the BR Tax Code Mean?
The BR tax code is applied when your employer isn’t sure how much personal allowance you’re entitled to. It means you’re taxed at the basic rate (20%) on all your income, regardless of whether you have personal allowances remaining. While this ensures you’re not underpaying tax, it can lead to overpayment.
For example, if you have two jobs, your second employer may assign the PAYE tax code BR to prevent underpayment of tax. It simply means you’re being taxed as if you have no allowances left for that income stream.
The tax code BR cumul is a cumulative code applied to your earnings. Unlike the standard BR code, it accounts for your total earnings throughout the tax year, ensuring that tax is calculated fairly. This code helps prevent overpayment if your income varies.
Why Is the BR Tax Code Applied?
There are several reasons why you might have the Basic Rate Tax Code on your payslip:
- Multiple sources of income: If you have more than one job or receive a pension and income, your second source may be taxed at the basic rate.
- The employer hasn’t received your tax details: Sometimes, new employers may not have full details from HMRC, leading to temporary use of the BR Taxation Code.
- PAYE system delays: Occasional delays in the Pay As You Earn (PAYE) system could result in your tax code being set to BR temporarily.
Impact on Your Earnings
Being on a Basic Rate Income Tax Code means you may be paying too much tax. Here’s an example:
| Income Source | BR Tax Applied | Personal Allowance Considered | Effective Tax Rate |
|---|---|---|---|
| Primary Job | No | Yes | Basic rate (20%) |
| Second Job/Pension | Yes | No | 20% on all earnings |
In this case, if your second job or pension income is being taxed under the BR tax code, you’re missing out on personal allowance.
How to Check if You’re on a BR Tax Code
If you think you’re on the BR tax code, checking your payslip is the first step. The tax code will be displayed. Additionally, you can:
- Log in to your HMRC account: This will show your current tax code.
- Use a BR tax code calculator: This can help estimate how much tax you should be paying.
How to Correct a BR Tax Code
If you’re on the BR tax code but believe it’s incorrect, there are steps you can take to correct it:
- Contact HMRC: You can reach out directly via phone or your HMRC account.
- Submit a P45 or P60: If you’ve started a new job, providing your employer with these forms can ensure you’re taxed correctly.
- Request a tax code change: You can ask HMRC to reassign your allowances to the correct income source.
What is the Purpose of a BR Tax Code?
The Basic Rate Coding ensures that you’re at least paying tax at the basic rate, especially when employers or HMRC are unsure of your full tax details. It’s often a stop-gap measure to prevent underpayment of taxes, which could lead to future liabilities. However, it’s a temporary solution that usually requires correction to avoid overpayment.
Why You May Have a BR Tax Code
Several scenarios can lead to a Basic Rate Tax Code being applied:
- You’ve started a second job without updating your tax information.
- You’re receiving a BR tax code on pension.
- You’ve recently changed jobs, and HMRC hasn’t yet updated your new employer with your tax code details.
Example of PAYE on Tax Code BR
Let’s consider an example to better understand how PAYE operates under a BR Income Tax Code:
| Annual Income | Tax Code | Tax Paid at 20% | Personal Allowance Used? |
|---|---|---|---|
| £25,000 | BR | £5,000 | No |
| £25,000 | 1257L | £2,500 | Yes |
In the case of the BR tax code, all of your income is taxed at 20%, leading to a higher tax deduction.
Is BR an Emergency Tax Code?
The Tax Code BR is often confused with an emergency tax code, but they are not the same. An emergency tax code typically includes a temporary personal allowance, while the BR Tax Identifier applies the basic rate with no allowances considered. The tax code BR M1 is used as an emergency tax code, meaning it applies no personal allowance and taxes all income at the basic rate. This code is often temporary and should prompt you to contact HMRC for a review. It ensures that you are not underpaying taxes while your situation is clarified.
How to Change My BR Tax Code
If you’re incorrectly taxed under the BR Code, here’s how to change it:
- Notify HMRC: Provide details about your income and personal allowances.
- Update your employer: Ensure they have your correct tax information.
- Check regularly: Monitor your payslips and HMRC account for updates.
Will My BR Tax Code Change Automatically? Your Basic Rate Tax may change automatically, but it depends on updates from HMRC regarding your tax situation. If your income or employment status changes, HMRC should adjust your code accordingly. However, it’s wise to monitor your payslip to ensure you are on the correct code.
Could I Be Due a Tax Rebate?
If you’ve overpaid tax due to being on the Tax Code BR, you could be eligible for a tax rebate. HMRC will usually correct overpayments automatically, but you can also file a claim. This typically happens when:
- You leave a job.
- Your tax code is updated after you’ve been overtaxed.
How Much Tax Will You Pay on a BR Tax Code?
Under the Tax System Code, you’ll pay 20% on all income with no personal allowance considered. For instance, if you earn £30,000, your total tax will be £6,000.
Is a BR Tax Code Always Wrong?
Not always. If you have multiple sources of income or don’t qualify for a personal allowance on a particular job or pension, the BR Code may apply correctly. How do I correct my BR tax code? To correct your Tax Code BR, first, contact HMRC directly or use your online account to provide updated information about your income and allowances. You may also need to inform your employer of the changes. This process ensures that you pay the correct amount of tax moving forward.
HMRC Tax Codes Explained
When dealing with your taxes, it’s crucial to understand how BR codes are managed by HMRC. HMRC assigns this code when they lack complete information about your income or allowances. Regularly checking your BR tax code HMRC online account can help ensure you are taxed correctly.
Aside from the Basic Rate Code, there are several other tax codes HMRC uses to calculate your tax, such as:
- 1257L: The standard code, giving you a personal allowance.
- M1/W1: Emergency codes, which don’t account for previous earnings.
If you’ve been overtaxed while on the tax code BR, you may be eligible for a BR tax code refund. HMRC automatically reviews your tax situation at the end of the tax year. If you have paid too much tax, they will issue a refund, which can be a welcome surprise.
Conclusion
The BR tax code in the UK is often applied to ensure taxpayers don’t underpay. However, it can result in overpayment if left unchecked. To ensure you’re paying the right amount of tax, regularly check your tax code, update your employer, and contact HMRC if needed. If you’ve overpaid, you may be entitled to a refund. Understanding the BR tax code can help avoid tax errors and ensure your income is taxed accurately.
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About the Author: Ahmad Raza
