Tax Code 0T and 0T M1: What It Costs and How to Fix It

Tax code 0T gives you no Personal Allowance: every pound is taxed from the first one, at 20%, then 40%, then 45%. GOV.UK describes it as meaning either "your Personal Allowance has been used up" or "you've started a new job and your employer does not have the details they need to give you a tax code" (GOV.UK).

Two different payslips carry it, and they need completely different responses. On a current job, 0T is a paperwork failure, and on £2,500 of monthly pay it costs £209.50 a month. On a final payment after you have left, 0T is the rule your employer is required to follow, it is nobody's mistake, and it is why a leaving payment can arrive several hundred pounds lighter than you expected.

To check whether the tax, NI and PAYE lines look right on your own slip, see How do I check my payslip is correct?.

What 0T does to the arithmetic

The number in a tax code is your annual free pay divided by ten. 0T sets that number to zero, so there is no tax-free slice and the bands start from your first pound.

Against the standard 1257L, which gives £12,570 of free pay:

On £30,000 a year the annual tax is £6,000.00 under 0T against £3,486.00 under 1257L - £2,514.00 more.

On a monthly payslip, £2,500 gross

                              0T          1257L
Gross pay                £2,500.00      £2,500.00
Tax-free this period         £0.00      £1,047.50
Taxable pay              £2,500.00      £1,452.50
PAYE                       £500.00        £290.50
National Insurance         £116.16        £116.16
Net pay                  £1,883.84      £2,093.34

£500.00 − £290.50 = £209.50 a month, which over twelve months is the £2,514.00 above. National Insurance is identical in both columns, because NI is worked out from your pay against the published period thresholds and never looks at your tax code.

0T M1 on a payment after you have left

This is the one case where 0T is required rather than mistaken, and almost nothing written for employees explains it.

Once your employer has given you a P45, the rules change. If they then pay you anything else - accrued holiday, a final commission, a bonus voted after you left, a taxable redundancy payment above £30,000 - GOV.UK instructs them to use "tax code 0T on a 'week 1' or 'month 1' basis", or S0T in Scotland and C0T in Wales. They must "deduct National Insurance (unless it's a redundancy payment) and any student loan repayments as normal", report it with your original leaving date, give you written confirmation of the gross and the deductions, and must not give you another P45 (GOV.UK).

Two things about that code stack together, and the combination is what does the damage:

• 0T removes your Personal Allowance from the payment entirely.
• M1 makes the payment stand alone, taxed as though you earned that amount every month of the year. One twelfth of the £37,700 basic-rate band is £3,141.67, so anything above that in a single payment is charged at 40% - no matter what your actual annual income is.

Worked example - a £4,000 final payment

You leave in September, your P45 is issued, and £4,000 of accrued holiday and commission is paid in the following pay run. You are on Plan 2 for your student loan.

The PAYE splits into two slices, because M1 applies one twelfth of each band:

• £3,141.67 × 20% = £628.33
• £4,000.00 − £3,141.67 = £858.33, and £858.33 × 40% = £343.33

So £858.33 of a £4,000 payment is taxed at 40% even if you earn £30,000 a year. That is the mechanism, and it is correct - your employer is not making a mistake and payroll cannot apply a different code.

Worth knowing before you leave: the NI exemption applies to a redundancy payment, not to holiday pay or commission, and student loan deductions carry on as normal. See what to check on your payslip before you quit and redundancy pay and tax.

Why 0T appears on a job you still have

GOV.UK is direct about the usual cause: "If you did not fill this in, or you completed it incorrectly, you may have been given a BR or 0T tax code" - "this" being the starter checklist you complete when you have no P45 (GOV.UK).

HMRC's guidance to employers sets out where each code comes from. If you tell them you have another job or a pension - statement C - the employer uses BR. If the checklist cannot be completed at all, they use 0T (HMRC).

So a 0T on a live job usually traces back to the same thing: the starter declaration never reached payroll, or it reached them after the first pay run. It is a form, not a tax position.

The other genuine cause is that your allowance really has been used up elsewhere - by a pension in payment, or by a higher-paid main job that already carries the whole of your 1257L. In that case 0T on the second income is correct and there is nothing to fix.

Check the suffix on yours

Check the suffix, because it decides how you get your money back:

• 0T with no suffix is cumulative. When the right code arrives, your employer recalculates from 6 April and the refund comes through your next payslip automatically.
• 0T M1, 0T W1 or 0T X is not. Nothing is recalculated in-year, and the correction waits for HMRC's year-end reconciliation.

The same distinction runs through every emergency code - see what W1, M1 and X do to your payslip.

0T against BR

Both remove your Personal Allowance. They differ in what happens above the basic-rate band.

Below £37,700 of pay from that employment the two codes deduct exactly the same amount, because 0T's first band is also 20%. Above it they diverge: on £45,000 from one employment, BR takes £9,000.00 and 0T takes £10,460.00.

BR is never the more expensive of the two, which is precisely why it is the more dangerous one for a higher earner - it quietly under-deducts and leaves a bill at year end rather than a refund. There is a fuller comparison in BR vs 0T.

Getting it changed

If the 0T is on a payment after leaving, there is nothing to change. Skip to the P800 note above.

If it is on a current job, the order matters:

1. Ask payroll what they were told, not to change the code. "My code is 0T. Can you confirm what starter declaration was submitted on my first FPS, and whether HMRC has since sent a P6?" Once your first Full Payment Submission has gone, HMRC's instruction is that the employer keeps using that code "until HMRC sends you a new one" (GOV.UK). Payroll cannot simply overwrite it for you.
2. Fix the record at HMRC. Sign in to your Personal Tax Account and check your employments. Look for a previous job still showing as open: while HMRC believes it is live it allocates part of your allowance to a job you have left. Ending it there is often the whole fix.
3. Check the estimated pay HMRC holds for each employment on the same screen. A stale estimate from a better-paid job keeps the code wrong even after the employment record is right.
4. Call HMRC on 0300 200 3300 if the account will not let you correct it. Have your National Insurance number and the employer PAYE reference from your payslip.

Once HMRC issues a cumulative code, your employer recalculates from the start of the tax year on the next pay run and the overpaid tax comes back in that payslip.

Disclaimer

PayslipIQ provides automated educational guidance based on the figures you supply. It is not regulated tax advice, and payroll software rounds at points set out in HMRC's own tables, so a figure here may differ from your payslip by a few pence. For unusual situations or substantial back-pay claims, contact HMRC on 0300 200 3300 or use a CTA-qualified tax adviser.

Sources

• Tax codes: what your tax code means (GOV.UK)
• What to do when an employee leaves (GOV.UK)
• Changes to your tax code when you start a new job (GOV.UK)
• Tell HMRC about a new employee: late P45 or starter checklist (GOV.UK)
• Employer help card: understanding the starter declaration form (HMRC)
• P9X: tax codes to use from 6 April 2026 (HMRC)