Emergency Tax

Emergency tax is what happens when your employer has to run your pay without the information HMRC would normally have supplied. The code used is the standard one with a week 1 or month 1 marker attached, written as 1257L W1, 1257L M1 or 1257L X, and the marker is the whole of the problem. It tells payroll to treat every pay period as though it were the first of the year.

A cumulative code looks at your pay and tax for the year to date and works out what should have been deducted by now. A non-cumulative code cannot do that. It gives one period's worth of allowance and taxes the rest on that period alone, so it never repays an over-deduction and never notices that you were out of work for three months and have unused allowance to spare. In a steady month the result is often close to correct, which is why the problem goes unnoticed; in the month you start a job part-way through the year it can be badly wrong.

It is usually triggered by starting a job with no P45, by a first job after study, by a move from self-employment, or by drawing a pension for the first time. Two harsher codes are often confused with it. BR taxes the whole of that job at the basic rate with no allowance, and 0T gives no allowance and applies each band in turn. Neither is an emergency code, although both can be issued at the same moment and for the same missing information.

It corrects itself. Once HMRC has the full picture it issues a cumulative code, and the next payroll run repays the difference in one payment. You can bring that forward by completing the starter checklist accurately or by adding the employment in your personal tax account. If the tax year ends before it is corrected, the year-end reconciliation produces a P800 and a repayment instead.