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If your employer does not know what your tax code should be, you will be taxed on an ’emergency’ code. This means that you receive no tax-free personal allowance so everything you earn will be taxed at 20%. Although you can claim back overpaid tax from HMRC, it is better to get your code changed as soon as possible, so you are given the correct allowance and pay the right amount. To do this, you should give your employer your P45. If you are put on the emergency code, you will be given a tax free allowance of £11,000, above which you will then start paying tax.
For most employees this will be correct, as it is the basic personal allowance and assumes that you are entitled to 1/12 of the allowance each month. However, it does not take into account any backlog of allowance that may be due to you – for example, following a period of unemployment. For this reason your employer may have to adjust the coding in some cases. As with this code, you need to contact your employer straight away and give them your P45 in order to make sure you get the correct tax code!
For more tax info, call our contact number on +44 (0)20 3751 1266 or use our handy tax calculator to calculate what you could be owed.