When you look at your payslip and see the tax code “BR”, you might wonder what it means, and more importantly, why you're paying more tax than expected. This guide breaks down everything employees in the UK need to know about the BR tax code, when it's used, and what to do if it's wrong.
What Does "BR" Tax Code Mean?
The BR tax code stands for Basic Rate. It instructs your employer to deduct income tax at a flat 20% on all your earnings, without applying your tax-free personal allowance (which is currently £12,570 per year).
This code is most commonly applied:
- When you're starting a new job and haven't given your P45
- If you have more than one job or receive a pension alongside employment
- Temporarily, until HMRC updates your information
Why Am I on a BR Tax Code?
Being placed on a BR tax code typically means HMRC doesn’t have full details of your income. Reasons may include:
- You didn’t provide a P45 to your new employer
- You're employed in more than one role
- Your tax details haven’t been updated in the system yet
In many cases, it's a temporary code until your employer gets updated instructions from HMRC.
What’s the Impact of a BR Tax Code?
The biggest impact of a BR code is overpaying income tax. Since you're taxed at 20% from the first pound you earn, your tax-free allowance is not applied, which can result in less take-home pay.
However, the good news is that once corrected, HMRC usually refunds any overpaid tax.
What Should You Do If You Think It’s Wrong?
- Check Your Payslip – If it says BR, confirm if you're entitled to a personal allowance.
- Contact HMRC – Call or log in to your Personal Tax Account and report any incorrect tax code.
- Submit a P45 – If you’ve started a new job, make sure you give your employer your P45 or complete the starter checklist.
- Wait for the Update, HMRC will send your employer the corrected tax code.
Payroll Help Tip
Many businesses now rely on Payroll Services in Birmingham to manage these tax code issues efficiently and ensure employees are taxed correctly from day one. It's a great way to avoid costly errors and unnecessary stress.
Can You Claim Back Overpaid Tax?
Yes! If you’ve been taxed incorrectly under the BR code, HMRC will either:
- Adjust your future payslips to refund you automatically
- Or send you a tax refund at the end of the year via a P800 Tax Calculation
Final Words
The BR tax code is not always an error, but if you're on it and shouldn’t be, it's essential to act. Understanding your tax code can help you avoid overpayments and stay on top of your financial well-being.
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