How To Stop Emergency Tax - UK

You’ve seen it on your payslip, and it’s probably made you scratch your head a few times – ‘Emergency Tax’. But what exactly does it mean and importantly, how can you get off it? Don’t panic, as we’re here to decipher this financial jargon and guide you through the seemingly complicated process of escaping the emergency tax net.

What Is Emergency Tax?

The emergency tax is a type of withholding tax applied to your income in the UK when your employer or pension provider doesn’t have the necessary details to determine the correct amount of income tax you should be paying. It might sound alarming, but don’t worry it’s not as urgent as it sounds and it can be resolved.

Emergency tax is not levied because of any financial emergency – it’s simply a backstop tax applied when your tax codes are not available.

Why Am I Paying Emergency Tax?

You might have to pay emergency tax if you’ve started a new job and your employer doesn’t have a recent P45 form, or if you’re working on a casual or irregular basis. This basically helps HM Revenue & Customs (HMRC) keep track of everyone’s income and make sure the correct amount of tax is being paid. Don’t fret! You won’t have to pay emergency tax forever – and we’re here to guide you step by step to get off it.

Scenario	Likelihood of Paying Emergency Tax
You’ve started a new job	High (If your employer hasn’t received your P45 form)
You’re receiving company benefits or the State pension	High
You’re working casually or on an irregular basis	Medium
You’ve multiple sources of income	High

Understanding Your Tax Code

Before we look at how to get off emergency tax, let’s try to understand the basics of a tax code which plays a crucial role in your taxation process. Your tax code tells your employer or pension provider how much tax-free income you should get before they start taxing you.

In 2018, HMRC refunded £493 million to those who had overpaid due to emergency tax

How can I check if I’m on an emergency tax code?

You’re probably wondering how you can find out if you’re currently using an emergency tax code. We’ve got you covered. It’s not as complicated as it might sound.

First, you need to check your payslip. Your tax code can usually be found in the section labeled ‘Tax Code’ and it often begins with several numbers and ends with a letter. If your tax code is followed by ‘W1’, ‘M1’, or ‘X’, this indicates an emergency tax code has been applied.

In the event you can’t find your tax code on your payslip, the next step would be to contact your employer’s payroll department. They should be able to provide clarity about your current tax code status.

However, you may not always have easy access to your employer’s payroll department. Perhaps you’ve recently switched jobs, or you’re still waiting for your first payslip. In that case, you can also check your tax code by logging into your account on the official HM Revenue and Customs (HMRC) website. After logging in, navigate to the “Personal Tax Account” section, where you’ll find all your tax details.

Around 6 million people in the UK pay the wrong amount of tax each year

How Do I Get Off Emergency Tax?

Finally, the question you’ve probably been waiting for – how to get off emergency tax? The process isn’t too complicated, and with few steps, you can ensure that you’re paying the right amount of tax. We’ve outlined these steps in a simple, easy-to-follow list.

Provide Your Employer with Your P45: If you have one from a previous job, it can speed up the process.
Fill in a Starter Checklist Form: If you do not have a P45, you can fill in a Starter Checklist provided by HMRC.
Wait for Your Correct Tax Code: Once your employer submits the necessary paperwork, HMRC will issue the correct tax code, and your overpaid tax will be refunded.

Can emergency tax affect my pension contributions?

Yes, it’s possible that emergency tax could impact your pension contributions. Here’s how.

Typically, your contributions to your pension are taken out of your earnings before you’re taxed. However, if you’re on an emergency tax code, it could mean that you’re being taxed at a higher rate than you would normally be. In turn, this could leave you with less take-home pay and, consequently, lower pension contributions.

It’s important to note that this isn’t solely down to the emergency tax system. For instance, if your employer offers a salary sacrifice scheme and you choose to participate, you’ll see a reduction in your taxable pay. The amount you get from your salary after the pension contribution is deducted is what will be considered when calculating your emergency tax.

If you’re on a money purchase pension plan, this could be more complex. In this scheme, the amount you take home each month could directly influence the sum you contribute to your pension. Being on an emergency tax code might mean you end up contributing less to your pension each month than you initially intended.

In the tax year 2019-2020, over 800,000 people in the UK were put on emergency tax codes

Ultimately, you don’t want to be on emergency tax for longer than necessary. It can have a range of financial implications, including potentially affecting your pension contributions. The quicker you resolve this, the less impact it will have on your long-term savings and retirement plans.

Stats

1. In the UK, income tax is the main form of taxation, and is collected by HM Revenue and Customs (HMRC).
2. The current tax year in the UK runs from 6 April to 5 April the following year.
3. The emergency tax code in the UK is used when an employee’s regular tax code is not available, for example, if they are starting a new job and have not yet been issued a code.
4. According to HMRC, over 500,000 people are put on an emergency tax code each year.
5. An emergency tax code is usually a temporary measure, and will be adjusted once the employee’s correct tax code is received.
6. In the tax year 2020/21, the basic personal allowance for UK taxpayers is £12,500.
7. The emergency tax code for individuals earning between £12,501 and £50,000 is 20%, meaning they will pay 20% tax on their income in this range.
8. In 2019/20, the UK government collected £194 billion in income tax revenue.
9. The UK has a progressive income tax system, which means that those with higher incomes will pay a higher percentage of tax on their earnings.
10. As of 2019, the top 1% of UK taxpayers paid 28.1% of all income tax collected.
11. In addition to income tax, UK residents also pay National Insurance contributions, which go towards funding the state pension and other public services.
12. The emergency tax code also applies to self-employed individuals who have not yet registered for self-assessment.
13. In 2018/19, the average annual income per UK taxpayer was £30,000.
14. Higher rate taxpayers in the UK pay 40% tax on their income over £50,000.
15. Additional rate taxpayers, those earning over £150,000, pay 45% tax on their income over this threshold.
16. Taxpayers in Scotland pay a different rate of income tax than those in the rest of the UK, with 5 income tax bands ranging from 19% to 46%.
17. In 2018/19, the highest 10% of UK taxpayers paid 59.8% of the total income tax collected.
18. The term “emergency tax” can also refer to the taxes paid by individuals who earn above £100,000 and have their personal allowance reduced.
19. The UK government introduced a tax-free personal savings allowance in 2016, which means that most individuals do not pay tax on the first £1,000 of interest earned from savings.
20. Taxpayers in the UK can claim tax relief on charitable donations, meaning that the value of their donations is deducted from their taxable income.

Can emergency tax be applied to bonus payments?

Absolutely. In many instances, bonus payments may fall under the wide umbrella of ’emergency tax‘. When you receive a bonus payment, the payroll department may not have your tax details complete or up-to-date. Consequently, they might apply an emergency tax code to the payment. It’s a stark reminder that, just like with your standard pay check, it’s crucial to stay on top of your tax code for all sources of income, including bonuses.

You might be thinking, “Ok, I understand that, but how will it affect me?” Essentially, you will be taxed on your bonus at a higher rate until the situation is corrected. In other words, you may end up having more tax than needed taken off your bonus.

Worried already? Don’t be. Just like with your regular income, if you have been over-taxed on a bonus payment due to an emergency tax code, you are entitled to claim this back. For many, the reclaim process can happen automatically through payroll once your correct tax code is updated. However, depending on your specific circumstance or delay in updating your code, you might need to contact HMRC directly.

The bottom line? Don’t let your bonus become another emergency tax casualty. Stay informed, be proactive and remember, uncertainty over tax matters is common but it’s always manageable with the right information and action. Your hard-earned bonus deserves to be taxed fairly and correctly.

How to Stop Emergency Tax – UK

perry

Perry Stevens is the founder of BIGPriceDrops and a long-time digital marketer with a practical interest in helping UK shoppers find better value online. He focuses on clear, no-nonsense money-saving content, Amazon UK deal insights, and buyer guides that help readers spot genuine savings without falling for misleading discounts or impulse-buy traps.

When he is not working on BIGPriceDrops, Perry runs Blend Local Search Marketing and works on digital projects covering SEO, AI tools, and online business growth. His approach is simple: help people make smarter decisions before they spend their money.

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