Why Understanding Tax Codes Matters?
Taxes are a crucial part of financial planning, and your tax code determines how much tax you pay. If you’ve seen the BR tax code on your payslip and are wondering what it means, you’re not alone. Many UK workers are assigned this tax code, often without fully understanding its implications.
What does BR tax code mean that all of your income from a specific job or pension is taxed at a flat rate of 20%, without considering your allowance. This can be appropriate in some situations, such as when you have multiple sources of income. However, it can also be assigned by mistake, leading to excessive tax deductions.
Why Is the BR Tax Code Important to Understand?
- Overpaying tax: If applied incorrectly, you could be overpaying thousands of pounds in tax annually.
- Financial impact: Your take-home pay may be lower than expected if this code is applied to your main income source.
- Claiming tax refunds: If you’ve overpaid, you may be eligible for a tax refund, but you must take action to reclaim it.
In this detailed guide, we will explore everything you need to know about the BR tax code, including why it’s used, how it affects your income, and what you should do if it’s incorrect.
What Does BR Tax Code Mean? A Complete Breakdown
The BR tax code is assigned by HM Revenue & Customs (HMRC) and stands for Basic Rate tax code. This means:
- Every pound you earn from that particular income source is taxed at 20%.
- Your allowance (£12,570 for 2024/25) is NOT applied to this income.
- It is commonly used for second jobs and pensions.
- It may be applied temporarily while HMRC processes tax details.
Key Point: If your BR tax code is applied to your only job, you may be paying more tax than necessary.
Why Might You Have a BR Tax Code?
Several reasons can lead to the BR tax code being applied. Some are valid, while others indicate a mistake in tax calculations.
1. You Have a Second Job or Receive a Pension
If you have multiple sources of income, HMRC ensures that your allowance is applied only once, typically to your primary job. Any additional income is taxed at a flat 20% rate, which is why the BR tax code is used.
2. You Started a New Job Without a P45
A P45 is a tax document from your previous employer that details your earnings and tax deductions. If you don’t provide it to your new employer, they may assign the BR tax code by default.
3. Your Employer Has Incorrect Tax Information
Mistakes can happen—sometimes, an employer assigns the wrong tax code due to missing or incorrect tax details. If your employer mistakenly uses BR for your main job, you could be overpaying tax.
4. HMRC Assigned It as an Emergency Tax Code
HMRC may temporarily apply the BR tax code while verifying your tax records. This often happens if:
- You change jobs in the middle of a tax year.
- You go back to work after a long gap.
- You start receiving pension payments alongside a salary.
5. Your Tax Code Hasn’t Been Updated After a Pay or Job Change
If you’ve switched jobs, received a pay increase, or started earning from another source, your tax code might not have been updated correctly. This could result in unnecessary tax deductions under BR.
How Does the BR Tax Code Affect Your Salary?
When the BR tax code is applied, all of your earnings from that job or pension are taxed at 20%, without considering your allowance.
Example of BR Tax Code on Different Salaries
| Annual Salary (£) | Tax Paid Under BR Code (20%) (£) | Take-Home Pay (£) |
| £10,000 | £2,000 | £8,000 |
| £20,000 | £4,000 | £16,000 |
| £30,000 | £6,000 | £24,000 |
| £40,000 | £8,000 | £32,000 |
Impact of Incorrect BR Tax Code on Your Income
If you have only one job and are assigned a BR tax code, you lose your allowance (£12,570), which could lead to overpaying tax.
Example:
- If you earn £30,000 per year under a normal tax code (1257L), you’d pay £3,486 in income tax.
- Under BR, you’d pay £6,000, meaning you overpay by £2,514 annually!
How to Check If Your BR Tax Code Is Incorrect?
To avoid overpaying tax, you should regularly check your tax code. Here’s how:
Look at Your Payslip – If you see BR, all earnings from that job are taxed at 20%.
Compare Your Tax-Free Allowance – If you have only one job and BR is applied, you’re likely paying too much tax.
Use HMRC’s Online Tax Checker – Log in to your Tax Account to verify your tax code.
Warning: If the BR code is incorrectly applied to your only job, you must contact HMRC immediately.
How to Correct an Incorrect BR Tax Code?
If you believe your BR tax code is incorrect, take action quickly to ensure you’re not overpaying tax.
Steps to Fix a Wrong BR Tax Code
Speak to Your Employer – Ask if they received the correct tax details from HMRC.
Contact HMRC – Call 0300 200 3300 or visit GOV.UK to correct your tax code.
Provide a P45 or P60 – Submit your P45 (previous job tax summary) or P60 (end-of-year tax summary).
Update Your Tax Information Online – Log in to your Personal Tax Account and correct any errors.
Once updated, your employer will adjust your future salary payments accordingly.
Can You Claim a Refund for Overpaid Tax?
Yes! If your BR tax code was applied incorrectly, you can claim a refund for the excess tax paid.
How to Claim a Tax Refund?
- Check Your Payslips – Look for any overpaid tax amounts.
- Use HMRC’s Refund Checker – Visit the GOV.UK tax refund page and enter your details.
- Submit a Claim – If eligible, HMRC will process your refund and transfer the money to your bank account.
Refund Timeline: HMRC typically processes tax refunds within 5-8 weeks.
Conclusion: Stay Informed and Keep More of Your Money
Understanding tax codes like the BR tax code is crucial for managing your finances effectively and ensuring that you aren’t overpaying tax. While this tax code is commonly applied to second jobs or pensions, it is sometimes assigned incorrectly, leading to unnecessary deductions from your salary. If left unchecked, this can result in you losing thousands of pounds every year.
- Regularly check your tax code on payslips and through HMRC’s online system.
- Understand why the BR tax code is applied to ensure it’s correct in your case.
- If BR is applied to your only job, take action immediately to correct it.
- Claim tax refunds if you have overpaid to recover your lost income.
Tax codes may seem complicated, but with the right knowledge, you can ensure that you pay only what you owe—nothing more, nothing less. Stay informed, be proactive, and take charge of your finances so that every penny you earn is working for you!
FAQs About BR Tax Code
Can the BR tax code be applied to my only job?
No. If BR is applied to your only job, you may be overpaying tax and should contact HMRC.
How do I check if my tax code is correct?
Check your tax code on your payslip, P45, P60, or HMRC’s online tax checker.
How long does it take to update my tax code?
HMRC usually updates tax codes within a few weeks once you submit the necessary documents.
