Tax Code D1 Explained

What does D1 mean?

D1 is the additional-rate counterpart to BR and D0: it tells the employer or pension provider to deduct income tax at the additional rate of 45% on every pound of pay from this source, with no personal allowance and no basic- or higher-rate bands applied. It is reserved for taxpayers whose primary income has already consumed both the personal allowance and the entire £125,140 of basic and higher-rate bands, which in practice means people earning £125,140 or more from a main job who also have a second source of taxable income. Typical examples include senior executives with a non-executive directorship, partners with a secondary salaried role, or pension drawdown income paid alongside a high salary. D1 becomes a problem when HMRC has overestimated your main income - for instance after a redundancy, a major salary cut, or the removal of a one-off bonus from prior assumptions. In that case you will see a deduction of 45% on a secondary income that would otherwise have been taxed at 20% or 40%, leading to a sizeable overpayment.

Breakdown of the code

• D1

  Letter pair

  Deduct at additional rate - flat 45% with no allowance, used for income on top of additional-rate primary pay.

Worked example

Senior executive with a £30,000 secondary directorship on top of £200k base on £30,000 (paid monthly).

£30,000 × 45% = £13,500/year - correct only when primary income exceeds £125,140.

Who should be on D1?

• Additional-rate taxpayers (>£125,140 primary income) with a secondary PAYE source
• Directors with multiple board fees paid above the additional-rate threshold
• High-earning pension drawdown alongside an additional-rate salary

Common problems

• A salary cut or redundancy means your primary income is now in the basic- or higher-rate band - D1 becomes punitive overnight.
• A one-off bonus inflated HMRC's estimate of your main income.
• D1 is occasionally applied in error after a coding review for a previous-year underpayment.

What to do if D1 looks wrong

1. Sign in to your HMRC personal tax account at gov.uk/personal-tax-account and open the latest P2 (Notice of Coding) - it itemises every adjustment.
2. Compare the code on your most recent payslip with the code HMRC has on file; employers occasionally apply an old code if a P9 was missed.
3. Confirm your employer received your P45, or that you completed a starter checklist if you joined mid-year.
4. Check whether benefits-in-kind such as a company car, fuel, or medical insurance have changed and ask payroll to file an updated P11D.
5. Call HMRC on 0300 200 3300 (Mon-Fri, 8am-6pm) with your National Insurance number if the online tools cannot resolve it.
6. If you have overpaid, HMRC normally refunds via your next payslip once the code is corrected. For closed years request a P800 review.

If you should be on a different code…

Quick decision tree - when D1 is the wrong fit, here is the most likely correct code.

• If you have a single PAYE job and no benefits-in-kind - you should be on 1257L.

  Standard personal allowance of £12,570 for England, Wales and NI.

• If your main income now sits below £125,140 - you should be on D0.

  All income from this source taxed at 40%, no personal allowance.