Hi everyone! Today, we’re going to unpack a topic that might seem tricky but is quite important for all taxpayers: the BR tax code. We’ll explore what it is, how it can affect your take home pay, and what to do if you find this tax code applies to you.
Tax Codes in General
Before we delve into the intricacies of the br tax code, let’s get a handle on tax codes in general. A tax code is the mechanism the tax authority uses to work out how much tax should be deducted from your income or pension. Here in the UK, HMRC (Her Majesty’s Revenue and Customs) dishes out tax codes, and there’s quite a variety to get to grips with. The BR tax code is one such example, with its own unique characteristics and implications.
Unravelling the BR Tax Code
So, what exactly does the BR tax code mean? BR stands for Basic Rate, which means that all the income under this code is taxed at the basic rate – 20% as of my last update. This tax code typically comes into play when you have more than one source of income. In this situation it is usually applied to your secondary income source (your second job or a pension, for instance).
It can also be applied when a person starts a new job without a P45 from a previous employer. This might occur for a number of reason including first employment or having been out of the work force for a number of years. Where this happens, the br tax code will only be temporary as HMRC will amend it to a standard one in a matter of time.
If you see ‘BR’ on your payslip, it indicates that you are taxed at the basic rate from the first pound earned, without any personal allowance deducted. This is because your personal allowance has already been accounted for in your primary income source.
The BR Tax Code and Your Tax Liability
Now, you might be wondering how the BR tax code affects your tax liability. As mentioned, a BR tax code means that you’re taxed at the basic rate on all your earnings from that income source.
Let’s take an example to help illustrate this. Suppose you have a full-time job where you earn £30,000 per year, and a part-time job where you earn an additional £10,000 per year. Your personal allowance (let’s say it’s £12,570) is used up in your main job, and so the entire £10,000 from your part-time job is taxed at the basic rate of 20%. So, you would pay £2,000 in taxes on your part-time job earnings.
What to Do If You’re on a BR Tax Code
Alright, so you’ve spotted ‘BR’ on your payslip. What now? The first step is to verify whether it’s correct. Tax codes aren’t infallible, and sometimes you might find you’re on the wrong one. You can check this by using the tax checking service provided by HMRC or by directly reaching out to them.
If you’ve confirmed that your tax code is incorrect, don’t hesitate to contact HMRC. They can help adjust your tax code and inform your employer or pension provider to modify your tax deductions accordingly.
Conclusion
Understanding your tax code, especially if it’s the BR tax code, is crucial. It ensures that you’re not paying too much (or too little) tax. So, always double-check your tax code, understand what it implies, and don’t hesitate to take action if you think it’s not right.
Frequently Asked Questions
- What does a ‘BR’ tax code mean? A ‘BR’ tax code means that you are taxed at the basic rate on all your earnings from that income source, without any personal allowance deducted.
- Will a ‘BR’ tax code make me pay more tax? A ‘BR’ tax code can result in paying more tax if it’s applied incorrectly. However, if it’s correct and it’s applied to your secondary income, it means you’re just paying the basic rate tax on that income, as you should.
- What should I do if I think my ‘BR’ tax code is wrong? If you believe your tax code is incorrect, get in touch with HMRC. They can help you understand why you’ve been given a particular tax code and change it if it’s incorrect.