What Does The BRM1 Tax Code Mean?
If you want to know what the BRM1 tax code means, you will find detailed guidance in the following blog post. Here, we will discuss the meaning of the BRM1 tax code, its impact on your Personal Allowance and income tax, the reasons for being assigned a BRM1 tax code, as well as what to do to get your tax code updated.
What Does The BRM1 Tax Code Mean?
The BRM1 tax code means the following:
- you do not have a tax-free Personal Allowance of £12,570
- your entire income is being taxed at the basic rate
This means that if your income is between £12,571 and £50,270, you will be paying your tax to the HMRC at the basic rate of 20% without having the benefit of tax relief in the form of a Personal Allowance.
In usual cases, incomes are taxed after the deduction of a tax-free amount called the Personal Allowance. The Personal Allowance amount for the current tax year of 2022 to 2023 is the same as the previous tax term of 2021-2022 and stands at £12,570. This means that this tax-free amount is first deducted from your income before the remaining amount is taxed.
When your tax code is BRM1, the letters “BR” indicate that a basic rate of 20% will be deducted from your income without the exclusion of a Personal Allowance. The term “M1” indicates that this tax code applies to the particular month in which you are being taxed and the tax code can change in the next month or the next few months.
This is also called a non-cumulative, emergency tax code which does not take your annual income into account and only considers the month to which it is being applied. As most of you would know that when the HMRC assigns a new tax code to you, you will find this tax code mentioned on your payslip, next to your National Insurance number.
One of the main reasons why you could be assigned the BRM1 tax code could be because you have recently started a new job and that too in the middle of a tax term. Some other reasons for being assigned the BRM1 tax code include the following:
- your employer does not have complete or correct details to assign you a permanent tax code
- you have started a new job but have not provided your employer with a complete P45 form
- you are starting to work for the first time and have not filled in a P46 form and provided it to your employer
- you have recently shifted from being self-employed and paying taxes under the self-assessment system to the PAYE system for income tax deductions
- you have an additional income (through a second job or a pension) besides the job where you’ve been assigned the BRM1 tax code
If none of these situations applies to you and you think you’ve been assigned the BRM1 tax code by mistake, you should discuss this with your employer and inform the HMRC. Otherwise, you might end up paying more taxes than you are required to.
What Should You Do To Get The BRM1 Tax Code Changed?
What you need to do to get your BRM1 tax code changed depends on your circumstances. We will discuss each of these situations individually:
- if you’ve started a new job in the middle of a tax term, you will have to wait until the end of the ongoing tax term to have the BRM1 emergency tax code changed to a permanent one
- if you’ve been assigned the BRM1 because your employer does not have complete or correct details to assign you a permanent tax code, you should provide them with the necessary details to avoid having to overpay your taxes
- if the reason for being assigned the BRM1 tax code is that you’ve started a new job and have not provided your employer with a complete P45 form, you should ask your previous employer to provide you with it
- if you are starting to work for the first time and have not filled in a P46 form or you have recently shifted from the self-assessment system to the PAYE system, you will need to fill out this starter checklist to have your tax code updated
- if you have additional income through a second job or a pension, you should check if you are being assigned a Personal Allowance for those incomes. In cases of secondary sources of income, your Personal Allowance will be applied to one job (usually your primary source of income) and not the other
If you overpay your taxes during this transition period, you will get a tax rebate from the HMRC at the end of the tax term.
How Are Tax Codes Worked Out?
Tax codes are worked out by the HMRC under the following process:
- First, your tax allowances are calculated under the PAYE system. This means adding your Personal Allowance to any other allowances that you may claim (such as Marriage Allowance or Blind Person’s Allowance).
- Then, your deductions are calculated based on your taxable income. This includes your earnings from a salary, rental income, wages from part-time work or certain state benefits.
- At the final stage, your deductions are subtracted from your tax allowances. The remaining amount is your pre-tax income on which a tax code is assigned.
Incomes are taxed based on the following classification:
- if your income is up to £12,570, you will pay 0% income tax
- if your income is between £12,571 and £50,270, you will pay 20% income tax
- if your income is between £50,271 and £150,000, you will pay 40% income tax
- if your income is above £150,001, you will pay 45% income tax
The above discussion helps to conclude that a BRM1 indicates that your income is being taxed at the basic rate but without consideration for tax relief on your Personal Allowance. This is an emergency tax code which is applied temporarily; usually until the end of an ongoing tax term.