It can be quite stressful if you see 0T tax code on your payslip. Now, this usually happens when there’s an incorrect tax code HMRC assigned on your income details. Basically, the OT tax code means that you don’t receive personal allowances. This is why your entire income gets taxed from the first pound itself.
Therefore, here’s a detailed guide on how you can fix it!
What does the 0T tax code mean?
In simple terms, a 0T tax code states that the HMRC has removed your tax-free personal allowances. Instead of receiving your £12,570 allowance, you end up paying tax on every pound you earned.If you're confused about your tax code, our trusted tax advisers can review your situation and ensure you're on the correct code. Now, this happens when the HMRC cannot find the right tax information for tax calculations.
Is the 0T tax code temporary?
So, in most of the cases, yes! It just acts as a placeholder until the HMRC gets all the necessary details from your employer. Certainly, you won’t be losing your allowances permanently. Also, if you feel that an incorrect tax code HMRC is issued then you have to get it corrected at the earliest.
Why was I put on the 0T tax code?
Now, you may receive the 0T tax code error probably for two most common reasons:
1. Your Personal Allowance has been used up
So, if your income is above £125,140 per year, then your tax-free allowance automatically reduces until it reaching zero.
2. Why HMRC Lacks full information
Now, this often happens whenever you:
- Start a new job without a P45 form submission.
- Switch employers during the mid-year.
- HMRC is very unclear about your income sources.
- There could be unresolved PAYE tax code issues UK from your previous jobs.
However, if your average salary is below £125,140 and you are holding your current job. Then, 0T code is likely a clerical mistake.
How much tax will I pay under the 0T tax code?
Since, every pound of income is taxable under 0T code also considering your tax band:
- It is 20% if you are falling under the basic rate.
- 40% if you fall in a higher-rate band.
- Or 45% if there's any additional rate involved.
As there’s no personal allowance involved, your take-home payout drops significantly. Now, this is a worrisome factor for employees if an incorrect tax code HMRC is applied.
Is the 0T tax code the same as an emergency tax code UK?
Not quite at all! The emergency tax code UK allows some portions of personal allowances. But it only happens temporarily during job changes. Whereas, The 0T code gives you no allowance at all.
Will I get a refund if HMRC used the wrong tax code?
Now, if you have over paid because of HMRC tax code corrections being delayed. Then, there are high chances of receiving a refund. Besides, once the HMRC assigns your correct code it will adjust your future taxes.
So, in order to speed up the correction process, you can try:
- Checking up with your employer if they have your P45 with correct information.
- Reviewing your tax code through Personal Tax Accounts
- Contact the HMRC department if necessary for better explanation of the situation.
- Find out if you need to file a tax return for a wrong tax code to settle any overpayment.
If you have multiple income sources or are self-employed alongside your employment, tax code errors can become more complex. TaxSimba's self-employed tax return services can help you file accurate returns and claim any overpaid tax back from HMRC.
Bottom Line
Summing up, the 0T tax code looks concerning but it's mostly temporary due to misinformation. This is why fixing an incorrect tax code HMRC at the earliest ensures fair taxation practices. Now, if you are looking for expert guidance on tax code corrections or need help understanding your payslip taxation, TaxSimba's tax specialists can help you resolve HMRC tax code issues quickly and ensure you're paying the right amount of tax. For a complete list of all UK tax codes and what they mean, visit HMRC's official tax codes guidance.