Introduction to UK Tax Codes
Tax codes are essential in the UK tax system as they determine how much income tax should be deducted from your earnings by your employer or pension provider. Each tax code is made up of letters and numbers, representing your personal tax allowances and any special conditions affecting your tax payments. Understanding your tax code can help you avoid overpaying or underpaying taxes.
At Ultra Tax Ltd, we often assist clients who are unsure about their tax codes and help them optimise their tax payments. One of the most commonly misunderstood tax codes is
Tax Code BR, which can lead to confusion and higher tax deductions.
What Does Tax Code BR Mean?
The BR in Tax Code BR stands for "Basic Rate." This tax code is applied when all of your income is taxed at the basic rate of 20%, without considering any personal allowance. Under this code, none of your income is tax-free. Unlike standard tax codes, such as 1257L, which allow for tax-free personal allowances, BR applies the 20% tax rate on every penny earned.
Typically, Tax Code BR is used when you have more than one job or pension, where your personal allowance is already being used by your main source of income. It’s important to ensure this code is being applied correctly to avoid overpaying tax.
Why You Might Be Assigned Tax Code BR
There are several reasons why HMRC may assign you Tax Code BR, including:
Having multiple jobs: If you have more than one source of income, your primary job or pension will likely benefit from your full personal allowance, while your second job will be taxed at the basic rate using BR.
Starting a new job without a P45: If you don’t provide a P45 from your previous employer when starting a new job, your employer may use the BR code until HMRC updates your tax details.
Receiving a pension while working: If you receive a pension alongside employment income, your pension may be taxed at the basic rate under the BR code.
Incorrect tax code assignment: Sometimes, HMRC or employers mistakenly assign Tax Code BR when it isn’t appropriate, leading to unnecessary tax payments.
At Ultra Tax Ltd, we help clients identify when Tax Code BR is being misapplied and ensure their tax situation is corrected quickly.
How Tax Code BR Affects Your Income
With Tax Code BR, 20% of your earnings will be taxed, regardless of your personal allowance. This could lead to overpayment if this tax code is applied incorrectly. For instance, if you're entitled to a personal allowance but are taxed using BR on your second job, you’ll end up paying more tax than necessary.
Let’s consider an example: if you earn £10,000 at a second job while on Tax Code BR, the entire amount will be taxed at 20%, resulting in a £2,000 tax deduction. If this job should benefit from part of your personal allowance, you're likely overpaying.
Ultra Tax Ltd specialises in identifying situations where the BR tax code has been wrongly applied and helping individuals reclaim any overpaid tax from HMRC.
How to Correct Tax Code BR
If you’ve been assigned Tax Code BR and believe it’s incorrect, don’t panic. Correcting this tax code is usually a straightforward process. Here’s what you should do:
Check your payslip: Review your payslip to ensure you know which tax code is being applied. If you see BR and think it’s wrong, you’ll need to take action.
Contact your employer: Make sure your employer has your up-to-date tax information, including your P45 from previous jobs.
Reach out to HMRC: You can directly contact HMRC to discuss your tax code and request a correction. HMRC will review your earnings and issue a new tax code if needed.
At Ultra Tax Ltd, we can handle the entire process for you, ensuring that your tax code is corrected and any overpaid tax is refunded. Check how much your can reclaim with our
Common Scenarios Leading to BR Tax Code
BR Tax Code often applies in situations involving multiple income streams. Here are some common scenarios:
Second job: If you take on a second job and your personal allowance is fully used by your first job, your second employer may apply BR.
Pension income: If you start receiving pension payments while still working, the BR code might be applied to your pension income.
New employment without P45: If you start a new job and don’t supply a P45, your employer may apply BR until HMRC updates your tax code.
Freelancing alongside PAYE employment: If you have a side business while working under PAYE, you might see BR applied to one income source.
Understanding these scenarios is key to making sure you’re not being overtaxed. If you’re in doubt, Ultra Tax Ltd can review your situation and help resolve any tax code issues.
When BR Tax Code is Correct
In some cases, BR might be the correct tax code. This happens most often when:
You have multiple jobs and have already used your personal allowance with your primary employer.
You’re receiving pension payments alongside other income.
However, if you only have one job or pension and are on Tax Code BR, it’s likely an error, and you could be paying more tax than necessary.
How Ultra Tax Ltd Can Help with Tax Code BR
At Ultra Tax Ltd, we specialise in identifying tax code issues and ensuring that our clients are not overpaying their taxes. Our experienced accountants can:
Review your tax code: We will check if BR is being applied correctly and identify any potential overpayments.
Contact HMRC on your behalf: We’ll liaise with HMRC to correct your tax code and reclaim any overpaid taxes.
Maximise your tax refund: Our experts will ensure you’re not leaving money on the table and are taking full advantage of your personal allowance.
We’ve helped countless clients resolve tax code issues, ensuring they pay the right amount of tax without any surprises.
How to Avoid Being Assigned BR Tax Code
To avoid being placed on Tax Code BR incorrectly, it’s important to stay on top of your tax records. Here are some tips to avoid this:
Provide your P45 to your new employer when starting a new job.
Keep HMRC updated on any changes in your income or employment status.
Check your payslips regularly to ensure the right tax code is being applied.
Seek professional tax advice if you have multiple income streams or work under both PAYE and self-employment.
At Ultra Tax Ltd, we help our clients avoid common tax code mistakes and ensure their tax situation is always up to date.
Conclusion: Resolving Tax Code BR with Ultra Tax Ltd
If you find yourself on Tax Code BR and think it’s a mistake, the sooner you act, the better. By correcting this issue quickly, you can avoid overpaying and potentially reclaim any taxes you’ve already overpaid.
At Ultra Tax Ltd, we provide personalised tax services to help you navigate complex tax codes, resolve errors, and get back any money you might be owed. Contact us today, and let’s get your tax situation sorted!
Frequently Asked Questions (FAQs)
What is Tax Code BR used for?
Tax Code BR is used when all of your income is taxed at the basic rate of 20% without any personal allowance. It’s commonly applied to second jobs or pension income.
Can Tax Code BR result in overpayment?
Yes, if BR is applied incorrectly, you could end up overpaying tax since it doesn’t account for any personal allowance.
How do I change my tax code from BR?
You can contact HMRC directly or work with Ultra Tax Ltd to review your tax code and request any necessary changes.
Is Tax Code BR permanent?
No, BR is not permanent. It can be corrected once your tax situation is clarified with HMRC.
Will I get a tax refund if BR was applied incorrectly?
Yes, if BR was applied incorrectly and you overpaid tax, you may be entitled to a refund.
Ultra Tax Ltd can help you reclaim any overpaid taxes from HMRC.
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