Why Is My Tax Code 0T X?
By
HuutiMoney
The aim of this blog post is to help readers in answering the question of why they have been assigned the 0T X tax code. We will discuss the possible reasons why a PAYE tax[ayer can be assigned the 0T X tax code, how it applies to their income and what deductions they can expect. We will also explore the process of getting a refund on overpaid taxes if you are assigned an emergency tax code such as 0T X.
Why Is My Tax Code 0T X?
If you have been assigned the 0T X tax code it means that your entire income will be taxed rather than the usual practice of deducting your Personal Allowance from a taxpayer’s income before the tax rate is applied.
The reason for having an 0T X tax code could be that you have started a new job and have not handed in your P45 to your new employer. Under such circumstances, it is common for employers to assign an emergency tax code such as the 0T X tax code.
One of the key consequences of being assigned an 0T X tax include is that you might end up overpaying your taxes since your Personal Allowance has not been taken into account while calculating your tax.
However, overpaid taxes can be recovered from the HMRC once a taxpayer is assigned a permanent tax code by their employer.
Since the 0T X code is an emergency tax code, it is also temporary in nature. This means that it will be changed during the course of the current tax term; in fact, it may even change within the first couple of months of being assigned to a taxpayer. When it is replaced by a permanent tax code, your Personal Allowance will be taken into account before any tax deduction is made and you will start paying the correct amount of income tax.
If you have overpaid your taxes due to the 0T X tax code, you can apply for a refund at the end of the tax term.
In order to avoid emergency tax when starting a new job in the UK, you should provide your new employer with your previous P45 at the earliest possible. This form will tell your new employer the amount of tax that you have paid during the ongoing tax year. If you don’t have a P45, you will need a P46 or a starter checklist at your new job.
Is 0T X An Emergency Tax Code?
Yes, 0T X is an emergency tax code that could be assigned to you if you have recently started working at a new place. Emergency codes are temporary and unlike regular tax codes, they can change during the year due to a change in circumstance or income(s) of the individual that they are being applied.
Emergency tax codes can be assigned to individuals by HMRC due to any of the following reasons:
- the individual is changing jobs and has been assigned a new tax code in the middle of the tax term
- the individual was previously self-employed and is returning to a salaried job
- the individual is returning to the workplace after a career sabbatical
On the other hand, a normal tax code is a combination of letters and numbers that indicate your Personal Allowance and the nature of your tax deduction. For instance, 1257L is currently the most common tax code in the UK. It refers to a Personal Allowance amount of £12,570 and the letter “L” indicates that the individual is entitled to this amount of tax-free income.
How Are Tax Codes Assigned?
Tax codes are assigned based on your income, the applicable rate of deduction and your Personal Allowance. They are a combination of letters and numbers that determine the amount of income tax due on an individual. The following steps are followed by the authorities while assigning tax codes:
- Step 1: Your tax allowances are calculated. In most cases, this is an individual’s personal allowance added to any other allowances and job expenses.
- Step 2: Your deductions are calculated. These are incomes for which tax has not been paid and may include any part-time work or certain state benefits.
- Step 3: The deductions are subtracted from the tax allowances. The result is your pre-tax income. If this amount equals personal allowance, your income remains tax-free.
You can check your income tax and assigned tax codes by using your Government Gateway user details.
Once you are assigned a tax code, a tax rate will be assigned to you on the basis of your income in the following ways:
- if your income is up to £12,570 your income tax will be 0%
- if your income is between £12,571 and £50,270 your income tax will be 20%
- if your income is between £50,271 and £150,000 your income tax will be 40%
- if your income is above £150,001 your income tax will be 45%
Can I Get A Refund On Overpaid Taxes If My Tax Code Is 0T X?
Yes, you can claim a refund on overpaid taxes if you were assigned an emergency tax code such as 0T X.
To claim a tax refund, you will need to use the P60 form and share the following details with HMRC:
- your earnings in total
- the amount of income tax that you have paid
- the amount of income tax that you have paid in excess
Additionally, you must also provide details of your National Insurance number and employer reference number.
In the case that a taxpayer has overpaid their tax due to any of the following reasons,
- being put on an emergency tax code due to starting a new job,
- having two jobs simultaneously, or
- switching from a full-time to a part-time job
they can reclaim the amount from HMRC after the end of the tax year. Claims for overpaid taxes can be made for up to four years. This means that an overpaid tax in 2022 can be claimed until 2026.
Conclusion:
The discussion in this blog post brings us to the conclusion that the 0T X tax code is an emergency tax code and if it is assigned to a taxpayer it means that their Personal Allowance will not be deducted from their earnings and the entire amount of their income will be taxed. If they end up paying an excess income tax due to this, they can apply for a tax rebate at the end of the tax term.
References:
What Is an OT Tax Code? | Tax Rebate Services