The majority of us when asked about our tax code have no clue what it is, or if we do, what it actually means.

While we know anything tax-related can be rather bewildering, it’s super important to stay clued up when it comes to your taxes, especially if you’ve recently started a new job or had a change in circumstances.

If the 0T tax code has paid an unexpected visit on your payslip, you’re most likely worried about how much tax has been deducted, and if it’s a permanent code. We’ll guide you through what it means.

What does the 0T tax code mean?

The 0T tax code basically means you have no tax-free personal allowance so every pound of your income is taxed. In most circumstances, individuals have a tax-free personal allowance of £12,570 which is spread out over the course of the tax year.

Is the 0T tax code temporary?

It can be, but this depends on why your tax code has been changed to 0T. It doesn’t mean you’ve been randomly selected to lose your tax-free personal allowance for life.

Why have I been given an 0T tax code?

You can be placed on the 0T tax code either because:

• Your Personal Allowance has been used up. This can happen if your income in a tax year is more than £125,140, because the personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000.
• HMRC don’t know enough about you. By this, we mean they haven’t got the full picture when it comes to your earnings, or how many forms of income you have. It might be because you’ve switched jobs and your employer doesn’t have all the details yet.

If you’re employed under PAYE with earnings below £125,140 and it’s your only form of income, it’s likely a mistake that needs to be rectified as soon as possible. See it as a placeholder, until HMRC has the correct information to assign your actual tax code.
 

How much income tax will I pay on the 0T tax code?

The 0T tax code is a scary one, because every penny of your income is taxed under this tax code.

How much you’re actually taxed depends on your total income. For example, if your total earnings put you in the basic rate tax bracket, you’ll pay 20% on everything. If you’re in the higher or additional tax band, you could see your entire income taxed at 40% or 45%. Yikes.

Is the 0T tax code the same as the BR tax code?

Nope. They do have similarities though. They both rob you of your personal allowance but with the BR tax code you know what you’re getting, as all your income is taxed at a flat rate of 20%. 0T on the other hand, could see you pay the higher rate of tax on all your earnings, depending on whether your income puts you into that tax bracket.

You’re most likely to see the BR tax code appear on your payslip if you have a second job or pension, and your personal allowance is used up. For instance, if you have a full-time job but also do agency work on the side. In a situation where you have multiple jobs, you can ask HMRC to divide your personal allowance between them all, so you aren’t hit hard on your other sources of income.

Will I get a tax rebate if I have an 0T tax code?

If you’ve overpaid tax, then yes. The 0T tax code can be used when HMRC doesn’t know enough about you. If this means they take too much tax from you (in an effort to make sure you don’t underpay) then you should get that back.

Once you’ve put together the missing pieces, HMRC will send you a new tax code. If you’ve overpaid tax, they’ll also send a letter or email to confirm how much they’ll refund you. You can usually follow a refund link, where you confirm your details and receive your hard-earned cash back within a few working days.

To ensure your tax code is changed, have a chat with your employer first to see if they need your P60 or P45. If they have everything and your tax code still hasn’t budged, reach out to HMRC to find out what they’re missing.

 
Need help with your tax code? Give us a call on 020 3355 4047 or get an instant online quote.