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Sometimes your employer or pension provider will have to put you on an 'emergency' - or 'special basis' - tax code until HM Revenue & Customs (HMRC) has worked out what your correct tax code for the year should be. This usually happens when they don't know enough about your income or tax details for the full tax year.
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An emergency tax code is a code that your employer or pension provider uses on a special basis until HMRC has enough information about your income to enable HMRC to send them (and you) your correct code. It normally makes sure that you get the basic Personal Allowance (and therefore some tax-free pay) but doesn't take into account any other allowances or reliefs you may be entitled to. Your employer or pension provider will normally keep using it until HMRC tells them what your correct tax code should be.
The emergency tax code is set each year and is a number followed by the letter L. The number is the basic Personal Allowance (£9,440 for the tax year 2013-14) divided by 10. The emergency code for 2013-14 is therefore 944L.
Depending on how it's worked out, you might also see '944L W1' or 944L M1' (meaning 'Week 1' or 'Month 1' - whereby you get a proportion of the Personal Allowance over the remainder of the tax year).
944L also happens to be the tax code you'll get if you are entitled to just the basic Personal Allowance but in this case it is not an emergency code and you will receive the right amount of tax-free pay. See the section 'When you might be put on an emergency tax code' to help you decide whether the emergency tax code might apply to you.
You might get an emergency tax code if:
You'll usually be put on a ‘cumulative’ emergency tax code if you've ticked Statement A on your P46 - telling your employer that this is your first job since the start of the tax year and you haven't been receiving any taxable pensions or state benefits.
The code used in this way will give you your full tax-free Personal Allowance over the remainder of the tax year - that's because your employer can carry forward any tax-free allowance not used in the period before you started your job. (As you've only just started work HMRC assumes that you haven't yet used any of your tax-free Personal Allowance.)
Your tax should be about right at the end of the tax year.
You might be put on a ‘week 1’ or ‘month 1’ emergency tax code if you've given your employer a P45 Part 3 showing a previously used week 1 or month 1 emergency code or you ticked Statement B on your P46 - telling your employer that you've had another job or taxable state benefits during the year - or your tax code has been reduced by a large amount.
The code used in this way will give you the remainder of your tax-free Personal Allowance spread over the rest of the tax year. HMRC assumes that you've already received some tax-free income in the period before you started your job or your tax code changed.
Week 1 or month 1 emergency codes treat each week or month on its own and give you an equal amount of tax-free pay every payday. As they can't take into account changes in your income or tax which may have happened earlier in the year your tax may not be exactly right at the end of the year.
Once HMRC has details of your previous income and tax paid for the tax year, they send your employer (and you) your full (correct) tax code. Your employer will deduct the correct tax in future and refund any overpaid tax. That's why it's very important that you give HMRC any information they ask you for.
If you think you've paid too much tax because you've been taxed on an emergency code you should claim a refund by contacting HMRC. You'll need to provide them with a form P60.