Taxes are levied at 20% on all income from this source if you are in the BR bracket.
In most cases, employers use this tax code until all the required information has been collected and the proper tax deductions have been made.
Avoid overpaying taxes and learn more about the BR tax code in this article.
The tax office (HMRC) assigns a tax code to anyone who is employed or receives income from PAYE (pay as you earn). Depending on the amount of taxes you pay, your employer deducts income tax from your paycheck.
Employees need to review their tax code and understand it. Since tax offices do not examine your code, it is up to you to do so. The mistake in your tax code could result in lost tax rebates or an unexpected tax bill.
Here are some of the letters that you might see in your tax code and their meanings:
L – Granted to people under 65. Individuals with this tax code get a basic personal allowance.
T – Commonly used if your tax code includes other calculations that will affect your personal allowance.
K – For individuals who do not have any tax-free personal allowance. It means you have income that is not being taxed in another way, and it’s worth more than your tax-free allowance.
Y – Granted to people over 75. Individuals with this tax code get the maximum personal allowance.
DO – Also known as higher rate taxpayer. Individuals with this tax code are liable to 40% tax.
NT – Not taxable.
BR – Basic Rate. Commonly granted to individuals with multiple sources of income. This is set at 20%.
Each taxpayer is entitled to a tax-free personal allowance that changes annually. Once your earnings exceed this allowance, you start paying taxes.
BR tax codes mean you are taxed at 20% on your entire salary, not taking into account your tax-free personal allowance.
The BR tax code is probably the most complicated of UK tax codes. It was introduced in 1978 and has since been changed many times. One key issue with this particular tax code is the amount by which it taxes income, which is found at 20%. This means that if you are paid £100,000 a year, you’ll have to pay £20,000 in tax. This can sometimes be seen as a form of tax on those who are paid well. An issue with the BR system is that it taxes many different types of income, making it difficult for people to know how much tax they’ll have to pay. One way these taxes can be offset is through various allowances, which are deductions from your taxable income.
The tax office will usually issue a new tax code at the beginning of the new tax year. It will be sent both to you and to your employer. A notice of coding (P2) will tell you your new tax code.
In some cases, the HMRC may issue you an inaccurate tax code. A wrong tax code could result in two outcomes: HMRC may owe you money for overpaying tax, or you may owe HMRC money for underpaying tax.
To avoid any issues, you may have your tax code corrected by submitting a P45 form to your employer. This will allow you to avoid overpaying or underpaying your taxes.
The process of paying taxes is simple, and as long as you know the basics, you’ll be able to complete your taxes on your own. However, if you are unsure or if there’s something that isn’t making sense, it’s best to speak with a tax professional.