What Is Tax Code BR and Why HMRC Might Assign It?

The BR tax code means that all your earnings from a specific income source are taxed at the basic rate of 20%, without any personal allowance applied. If you spot "BR" on your payslip, it usually indicates secondary income—like a second job or pension—where HMRC doesn’t apply your tax-free threshold. In some cases, it’s temporary, due to missing paperwork like your P45 or delayed employer reporting. This article explains exactly what BR means, why it’s assigned, whether it’s correct, and how you can fix it to avoid overpaying tax.

Tax Code BR Explained: What It Means for Your Income

The BR tax code stands for "Basic Rate". When this code is applied to a source of income, it means that all earnings from that specific source will be taxed at the basic rate of Income Tax, which is currently 20% in the UK.

The key issue with the BR tax code is that it doesn't take your personal allowance into account for that specific income stream. Every taxpayer in the UK is generally entitled to a certain amount of income that is tax-free each year, known as the Personal Allowance, which is typically £12,570. However, with a BR tax code, you are effectively paying tax on every pound earned from that source, right from the very first penny.

This differs from common tax codes like 1257L, which signify that you are entitled to the standard tax-free allowance, where the '1257' indicates a £12,570 allowance (the numbers multiplied by 10). While the BR tax code is often referred to as an "emergency code" or used in emergency tax scenarios due to temporary circumstances, it's important to understand that it's not always "incorrect". Its use can be a perfectly normal part of the UK tax system, particularly when you have multiple income streams.

Why HMRC Might Assign You Tax Code BR

There are several common scenarios in which HMRC might assign you a BR tax code. Understanding these reasons can help you determine if your code is appropriate or if it needs to be updated:

• Insufficient Information for HMRC or Your Employer:
• • One of the most frequent reasons is when your new employer hasn't received adequate information, such as your P45 from your previous job. Without your P45, your new employer lacks details about your earnings and tax paid in the current tax year, leading them to temporarily tax all your income at the basic rate until the correct information is provided by HMRC.
  • This can also occur if HMRC itself lacks up-to-date records, perhaps due to changes in your employment status or income sources that you haven't yet reported.
• Multiple Sources of Income:
• • This is a very common reason for a BR tax code. If you have more than one job, or if you receive income from a private pension or state pension in addition to employment income, your personal allowance is typically allocated to your main source of income. To prevent you from underpaying tax, any secondary income sources will then be taxed at the basic rate, hence the BR code.
• Transitioning from Self-Employment to PAYE:
• • If you're moving from being self-employed to working under the Pay As You Earn (PAYE) scheme, you may initially be assigned a BR tax code. Self-employed individuals do not receive a tax code; instead, they have a Unique Taxpayer Reference (UTR) and are responsible for their own Self-Assessment Tax Return. When transitioning to employment, HMRC needs time to update your records and assign the correct PAYE code.
• Starting Your First Job:
• • For individuals starting their very first job, a BR tax code might be temporarily assigned as HMRC gathers the necessary information to set up your correct tax profile.
• Receiving Company Benefits:
• • If you receive benefits from your employer, such as a company car or medical insurance, these might be taxed separately. If your main salary already uses up your personal allowance, these benefits could then be taxed under a BR code.
• HMRC Error or Oversight:
• • Although less common, sometimes a BR tax code can be assigned due to an administrative error or oversight by HMRC. This could happen if HMRC is unaware of your current employment situation or if there has been a misunderstanding of your income sources.

How Tax Code BR Affects Your Take-Home Pay

Having a BR tax code, especially if applied incorrectly to your main or only source of income, can significantly affect your finances.

• Higher Tax Deductions: The most immediate impact is that you will see a higher rate of tax deducted from your income compared to having your personal allowance applied. Since every pound earned from that source is taxed at 20% from the outset, without the benefit of the tax-free personal allowance, a larger proportion of your income will go towards income tax.
• Reduced Take-Home Pay: This higher deduction directly translates to a lower take-home pay. For example, if you earn £20,000 per year with a BR tax code, you would pay £4,000 in income tax (20% of £20,000). In contrast, with a 1257L code, your tax would be calculated after the personal allowance, resulting in significantly less tax paid and more take-home pay.
• Potential Overpayment of Tax: If a BR tax code is applied to your main or only job, you are highly likely to be overpaying tax. This is because you are missing out on the tax-free portion of your income that you are entitled to.
• Need for Vigilance: Due to these implications, it is absolutely crucial for you to regularly check your payslips. If there are any discrepancies or misunderstandings about your tax code, it's best to address them quickly to avoid losing money over time. Proactive financial planning, including exploring tax-efficient options, may be necessary if you are consistently on a BR tax code for a secondary income source.

How to Check If Your BR Tax Code Is Correct

Knowing where to find your tax code is the first step in understanding your tax situation. A tax code is a mix of numbers and letters that HMRC uses to tell your employer or pension provider how much income tax to take from your pay.

You can typically find your tax code in several places:

• Your Payslip: Your tax code is usually printed on your payslip, often located near your National Insurance number.
• Letters from HMRC: HMRC will send you a letter, known as a P2 Notice of Coding, informing you of your tax code, especially at the start of a new tax year or if your code changes.
• Your Personal Tax Account Online: You can access your current and past tax codes, view how your code was calculated, and update your job or income information by logging into your personal tax account on the GOV.UK website.
• HMRC Mobile App: The HMRC mobile application also provides quick access to your tax code and income details.
• P45 or P60 documents are end-of-year or job-leaving tax forms that also display your tax code history.

If you find "BR" on your payslip and it's your only job, or if you suspect it's incorrect for any reason, you should take action immediately.

Steps to Fix an Incorrect BR Tax Code

If you believe your BR tax code is incorrect, it is imperative to get it changed as quickly as possible. The longer you wait, the more tax you may continue to overpay.

Here’s a step-by-step guide on how to resolve issues with your BR tax code:

1. Don't Delay: Prioritise correcting your tax code. Unchecked mistakes can result in substantial overpayments that build up over time.
2. Gather Necessary Information: Before contacting HMRC or your employer, have your details ready. This typically includes your National Insurance number, recent payslips, and your P45 form from your previous employer if you've recently changed jobs. A P45 contains crucial information about your earnings and tax paid in your former employment.
3. Contact HMRC Directly: This is often the most effective way to resolve a tax code issue. You can phone them, use their online services, or write to them. When you contact HMRC, be prepared to provide details about all your sources of income and how much you expect to earn from each. This information allows HMRC to review your circumstances and determine the correct tax code.
4. Update Your Employer: Once HMRC has reviewed your situation and issued a new tax code, they will typically notify your employer directly. Make sure your employer has the correct information by providing your P45 or a completed P46 if needed. This ensures they can adjust your payroll deductions properly.
5. What HMRC Does: After reviewing your tax records, if a mistake is identified, HMRC will issue a new, correct tax code. They will then notify both you and your employer. Your tax account will be adjusted to reflect any overpayment, which may result in a refund or adjustments to future tax codes.
6. Maintain Records: It's wise for both you and your employer to maintain accurate records of all communications and actions taken to rectify a tax code issue. This documentation can be invaluable for future reference or in case of any disputes.
7. Seek Professional Advice: If your tax situation is particularly complex, such as having multiple jobs or varied income streams, or if you find the process daunting, you may prefer to discuss your tax code with a tax expert or chartered tax advisor. They can offer personalised guidance and help you navigate the complexities of your tax affairs.

Can You Claim a Tax Refund for BR Code Overpayments?

If you have been incorrectly assigned a BR tax code, especially if it was applied to your main or only source of income, you may have overpaid tax and could be entitled to a refund.

• Eligibility: A refund is typically due if the BR code was applied by mistake, causing you to pay tax on earnings that should have benefited from your personal allowance. This applies not only to the current tax year but also to previous ones.
• Timeframe: Under current UK law, you can typically claim a tax rebate for the past four tax years.For instance, at the time of writing, you could claim for tax years ending 5th April 2022, 2023, 2024, and 2025. This means you can effectively claim tax relief from 6th April 2021.
• How Refunds Are Issued: HMRC generally reviews your tax situation automatically at the end of the tax year. If they find you have paid too much tax, they will typically issue a refund, sometimes via a P800 form. You can also proactively claim a refund by submitting a tax return or by directly requesting one from HMRC.
• Obtaining Past Information: If you need records for previous tax years to support a claim, you have several options:
• • Contact Former Employers: Employers are legally obliged to keep your records for up to six years and must provide them to you upon request, complying with GDPR.
  • Government Gateway: You can log into your personal tax account via the government gateway, which provides access to your tax history.
  • HMRC Tax History Letter: You can contact HMRC directly and request a tax history letter, which typically covers the last four years and is usually mailed within 10 working days.

How Employers Handle BR Tax Codes in Payroll

Employers play a critical role in the accurate application of tax codes and ensuring compliance with HMRC regulations. Their responsibilities extend beyond merely deducting tax:

• Accurate Application of Tax Codes: Employers are required to apply the tax code provided by HMRC for each employee precisely. If an employee is assigned a BR tax code, it must be correctly applied to their payroll.
• Promptly Updating Payroll Records: Any new tax code notices from HMRC must be swiftly updated in the payroll system. Delays can lead to incorrect tax deductions, potentially causing issues for both the employee and HMRC.
• Informing Employees: Employers should clearly communicate to employees when a BR tax code is being applied to their income. This transparency helps employees understand their payslips and empowers them to raise concerns.
• Providing Support and Guidance: While employers cannot provide personal tax advice, they can guide employees on how to contact HMRC for tax code queries or corrections.
• Handling multiple jobs: When an employer knows they are not an employee's main employer, it's especially important to correctly apply the BR tax code to the secondary income source to ensure proper taxation.
• Utilising Payroll Software: Efficient payroll software can significantly streamline the management of tax codes, automatically updating them and ensuring accurate deductions, thereby reducing errors and enhancing compliance.
• Regular Audits and Compliance Checks: Conducting regular internal audits of payroll processes helps ensure ongoing compliance and the correct application of tax codes, proactively preventing potential issues with HMRC.

By fulfilling these responsibilities, employers not only adhere to tax laws but also contribute to a transparent and supportive work environment, safeguarding their employees' financial well-being.

Understanding the BR Tax Code: Key Points to Note and When to Take Action

The BR tax code, while seemingly complex at first, is a crucial part of the UK tax system, particularly for individuals with multiple income sources or those transitioning between jobs. Understanding its meaning – that your income from a specific source is taxed at the basic rate (20%) without applying your personal allowance – is vital.

For you, as an employee, vigilance is key. Regularly reviewing your payslips, understanding the tax code applied, and promptly addressing any discrepancies can save you from overpaying tax. Remember, if your circumstances change, such as no longer having multiple jobs, it is your responsibility to inform HMRC so your tax code can be adjusted. This proactive approach can lead to a more accurate tax code and may even result in a tax rebate if you have overpaid.

For employers, accurate and efficient payroll management is paramount. Correctly applying tax codes as instructed by HMRC, maintaining up-to-date records, and supporting employees with their tax code queries are essential responsibilities.

Tax regulations and codes are subject to change, so staying informed about any updates from HMRC is always beneficial. Taking a proactive approach and getting familiar with the details of the tax code can help you handle the UK tax system more confidently, ensuring your financial matters are both fair and accurate.

Tax Code BR – Frequently Asked Questions

1. What does tax code BR mean?

The BR tax code stands for "Basic Rate," meaning all income from that source is taxed at 20%, with no personal allowance taken into account.

2. Is BR tax code always wrong?

Not necessarily. It’s often correct for second jobs or pensions, but if applied to your main income, it could lead to overpayment.

3. Why have I been assigned tax code BR?

HMRC assigns BR when your personal allowance is used elsewhere, or when your employer lacks full information like a P45.

4. Can I get a tax refund if BR is incorrect?

Yes. If BR was wrongly applied to your main job, you can contact HMRC to correct it and claim overpaid tax.

5. Where can I find out if BR is the right tax code for me?

Log into your HMRC Personal Tax Account, review your payslip, or check your P2 coding notice.

6. How do I fix a BR tax code?

Contact HMRC with your employment details and recent payslips. They’ll recalculate your tax code and notify your employer.

7. Does tax code BR apply to company benefits?

Yes—if your salary uses up your personal allowance, taxable benefits like a car or medical cover may fall under BR.

8. Do self-employed people get BR tax codes?

No. Self-employed individuals file taxes through Self Assessment, not through PAYE tax codes like BR.

9. Is tax code BR used for Scottish or Welsh taxpayers?

Scottish and Welsh variants exist (e.g. SBR or CBR), but standard BR is widely used across UK secondary income sources.

10. Can BR be temporary?

Definitely. Once HMRC receives correct employment data, they often update your code to one that reflects your allowance—like 1257L.