Introduction to Income Tax and NICs Pay As You Earn and income tax
the tax code for processing a payment after leaving will only be S0T or C0T if it had previously had an S or C prefix.
Only individual coding notices (and not the P7X or P9X notices) can adjust prefix D and K codes.
5.7.4 Other tax codes
BR
This code is used to specify that all earnings are taxed at the current basic tax rate (20%) with no allowances applicable.
The code is normally used where an employee has another job or gets a pension and all the appropriate allowances have already been given against that income. Hence, all other earnings attract tax at basic rate.
At the end of the tax year, HMRC will reassess the person’s total liability on the ir total earnings and will calculate any adjusting refund or underpayment.
0T
Note that this code is ‘zero - T’ and not ‘oh - T’. It is used where the person has no allowances to be offset against income. The various rates of income tax and earnings bands will still be applicable (the basic and higher rates, and so on).
This code is the default code for payments after leaving. It will also to be used if an employee fails to answer the employee declaration in the Starter Checklist.
NT
N stands for ‘no tax’, meaning no tax is to be deducted, and T is a suffix. This code must only be used if advised by HMRC. It would never be used with the S or C prefixes for Scottish or Welsh taxpayers.
Emergency tax code
HMRC prescribes an emergency tax code for each tax year. It is the code that, in practice, provides the basic personal tax allowance.
The emergency code is often, but not always, applied on a ‘ Week 1 / Month 1’ basis (see ‘ Cumulative and non-cumulative operation of PAYE ’ below). It is commonly used for new starters who have not provided a form P45 bearing a valid tax code. For 2023-24, the emergency tax codes are 1257L W1, 1257L M1 and 1257L X. (HMRC would issue an emergency tax code with X because it does not know the employee’s pa y frequency. The employer would replace the X with W1 or M1, as appropriate, when adding the new tax code to the payroll system.)
page 42 of 60
Made with FlippingBook - Online magazine maker