What is a BR tax code? If you have received a BR tax code from your employer, you are paying tax as a Basic Rate Taxpayer. The basic rate taxpayer charges the tax of 20% on your salary or on the pension. Different types of tax codes are used when you are working under the PAYE and switching jobs.
This is the reason you notice different tax codes at different times on your pay slips. Some of these tax codes, like the BR tax code, are used temporarily by your employer due to insufficient information. After they have received the information, they will update your tax code.
However, if you fail to get the correct tax code from your employer or from the HMRC, there is a high probability of overpayment of the taxes. It is also possible you might not enjoy the tax-free allowance unless you correct your tax code.
In this blog, we will discuss in detail the tax codes and the reasons for using them. Besides, we will provide details on the BR tax code. So, let’s dive in!
AccountingFirms is the right place for your tax problems as our professional accountants and tax advisors provide you with the best solution for all your tax needs.
What is a Tax Code?
A tax code is a combination of letters and numbers. It ends with a letter. Each letter determines the type of tax category in which your income falls. It determines the amount of tax you will pay over a particular level of income.
Moreover, some tax codes are used temporarily, like the BR tax code unless the uncertainty about the tax status of an employee has been sorted out. So, it’s essential you get the right tax code. Examples of tax include 1257L, 1257 W1, 1257 M1 and 1257X.
What is an Emergency Tax Code?
As discussed above, emergency tax codes are provided by employers when you switch jobs or start a new job. Moreover, if you have got an additional source of income. For each of these cases, there are some reasons, the new employer might not have all the required information they need to update your tax code.
In this case, they will issue an emergency tax code for a short time. Once you have updated your tax code, you will be refunded all of your overpayments in your salary. On the other hand, there are some drawbacks to using emergency tax codes and not updating them later.
The cases in which you get an emergency code
- You have joined a new organisation
- You are enjoying the benefits from the company or getting a pension as well.
- You have joined as an employee after having worked as a self-employed person.
What is a BR Tax Code?
BR tax code is also a type of emergency tax you get from your employer when they have insufficient information from your previous employer. For temporary reasons, they will give you a BR (Basic Rate) code.
BR code means you will pay a tax at a rate of 20% where your tax status is the basic rate. On the other hand, if you don’t correct your BR tax code, it will cause you to pay more taxes. So, it is crucial you get your tax code right as soon as possible.
Another disadvantage of using the BR tax code is that you will not be able to enjoy the tax-free personal allowance. In other words, your gross salary is being taxed at the basic rate. Moreover, you cannot avail other allowances and benefits from the HMRC under the BR tax code.
How To Correct Your BR Tax Code?
Correcting BR code is not complex. It can be corrected by following the straightforward steps of completing some forms and contacting the HMRC. Following are the steps to get your BR tax code corrected.
- Get the P45 form from your previous employer
- Contact the HMRC if neither of the above reasons is the source of the BR tax code.
P45 form consists of all the taxes and national insurance contributions you have made during the previous years.
Would I Get a Refund If I Overpaid?
Of course, you will get a refund from the employer as a part of your salary once they have sorted out the tax-related issues by getting the P45 form from your previous employer. On the other hand, you can get your tax code changed from the HMRC about your current level of income.
HMRC will contact you and they will send you a form P800 after correcting your tax code. As a result, they will also notify your employer about your new tax code. You can get a refund for the last four years if you have overpaid due to the wrong tax code.
The Final Thoughts
In the end, we conclude that the BR tax code is a short-term and emergency tax used by the employer for insufficient information from the previous employer. So, they provide a temporary tax code to the employees and they have to pay tax at a basic rate of 20%.
On the other hand, the major drawback of using this tax code is the unavailability of the personal income allowance of £12570. In the same way, the employees cannot get access to other benefits and allowances.
Fortunately, once you have changed your tax code, you can reclaim all your previous overpaid taxes. However, if you have changed your tax code lately after your income level was increased. You owe tax to the HMRC after getting the correct tax code.
Why not get help from qualified and accredited accountants at the AccountingFirrms in the UK? We are qualified, experienced and credible in delivering the best accounting services in the UK.
Disclaimer: All the information provided in this article on what is a BR tax code, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.