What does BR tax code mean?

A tax code is a string of numbers and letters that tells your employer how your earnings should be taxed. You get one for each Pay As You Earn (PAYE) job you have, and it’s important to keep track of them. Any time your tax code changes, HMRC will alter the Income Tax you’re paying each year.

BR stands for Basic Rate and means all your income from this source is taxed at 20%, without the benefit of a tax-free Personal Allowance which in the current tax year is £12,570.

This code is normally used temporarily until your employer has all of the necessary details to give you a correct tax code and apply the correct income tax deductions. But the BR code is not necessarily wrong but needs to be checked to make sure you’re not overpaying on tax.

There are a few reasons:

1. BR tax code is given because your employer does not have enough information to give you the correct tax code. In other words, you probably haven’t given your new employer a P45; which is the most common reason for people to be issued with a BR code.

2. Going from self-employment into PAYE employment.

3. Having an additional income, such as a second job or pension. As an example if you had 2 sources of income both earning £20,000 per annum. You would have 1 source of income with tax code 1257L and the 2nd with a tax code BR.

If you believe you shouldn’t have a BR tax code because none of the above-mentioned reasons apply to you, it’s important that you get your code corrected as quickly as possible. Otherwise, you’re likely to be paying too much tax because you’re not getting your personal allowance benefit.

If you’ve had a BR tax code during the last year, or any of the previous four tax years, you could be owed a refund for these years as well.

If you have not recently changed employer and you are unsure why you have a BR tax code you should contact HMRC. You should explain to HMRC that you would like clarification on why you have a BR tax code and if it is wrong they can change it for you. The process is simple and if you paying too much income tax this can be refunded to you after your new tax code has been sent and then used by your employer.

The Tax Code BR is one of many. There are many other codes including L, M, N, T, D & K.

For more info or to find out if you’re due a tax refund please get in touch with us at Cheylesmore Chartered Accountants, Coventry. Whether you've received a letter, have unpaid tax to disclose, or are under investigation, our team is here to help. Our tax investigation experts specialize in resolving tax issues in an efficient and timely manner.