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More about emergency tax codes

4 April 2024

The letters in an employee’s tax code signify their entitlement (or not) to the annual tax free personal allowance. The tax codes are updated annually and help employer’s work out how much tax to deduct from an employee’s pay packet.

The letters in an employee’s tax code indicate their entitlement to the annual tax-free personal allowance. Every year, employers update these tax codes to figure out how much tax to subtract from an employee’s pay. Sometimes there may however be a need for an emergency tax code.

The basic personal allowance for the tax year that starts on 6 April 2024 stands at £12,570. The tax code 1257L is for employees who qualify for the standard tax-free Personal Allowance. This is the most common tax code and it applies to most people who have one job and no untaxed income, unpaid tax, or taxable benefits such as a company car.

Emergency tax codes can be used if HMRC does not receive a taxpayer’s income details in time after a change in circumstances such as:

  • a new job
  • working for an employer after being self-employed
  • receiving company benefits or the State Pension

Employees on an emergency tax code will see one of the following codes on their payslip:

  • 1257L W1
  • 1257L M1
  • 1257L X

These codes calculate an employee’s tax based solely on their pay for the current period. These tax codes are temporary and usually update once HMRC receives the necessary details about previous income or pension payments. Taxpayers stay on an emergency code until they pay the correct tax for the year.

Source: HM Revenue & Customs Tue, 02 Apr 2024 00:00:00 +0100

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