M1 Tax Code: Mystery Behind the UK’s Emergency Code
M1 tax code, the emergency tax code, is used temporarily until HM Revenue & Customs (HMRC) has the necessary information for the appropriate tax code.
This is the case when someone starts a new business and doesn’t have a P45. In this case, you‘ll be asked to answer the questions from the employee statement.
So, following the form, if you select statement B, which is for Current Personal Allowance on a week 1/Month one basis
“This is now my job, but since the 6th of April, I have had another job or receivable taxable jobseeker’s Allowance Employment and Support Allowance or taxable incapacity Benefit. I do not receive a State or Occupational Pension.”
You will likely be placed in the M1 tax code or 1257M1, as will appear on your payslips. The key consideration of the M1 tax code is that it is non-cumulative. Calculating your current tax dues shouldn’t consider any tax you paid within the Tax year.
Example
If you are entitled to the standard tax-free Personal Allowance of £12570, your M1 tax code would be 1257 M1. This number, 1257, showcases the standard personal allowance. Under this code, the tax for a month will be based on the income earned in the month alone, without accounting for the tax paid or part of the allowance used in that year.
Click the links mentioned below to go straight to your chosen heading
- M1 Tax Code – Real Life Example
- What Should I Do if HMRC is not Changing my M1 Tax Code?
- Can You Manage Your M1 Tax Code?
- M1 Tax Code – Not Always A State Of Emergency
- M1 Tax Code – Not Always A State Of Emergency
M1 Tax Code – Real Life Example
We can explain a situation in which a person remained unemployed for the 2023/2024 tax year but somehow managed to find a job on October 1st, 2023/2024. This allowance is spread over the year, and he will secure £1047 every month, which is £7332 tax-free allowance for seven months.
If the emergency tax code is implemented, he will be accounted for and pay tax on a one-month allowance. The tax system will not recognise the earnings of his previous months, no matter how much he worked. This can also lead to over-taxation for that individual. This situation can only be changed when HMRC issues a suitable code from the PAYE calculation to the cumulative method, accounting for the entire tax year’s allowance.
What Should I Do if HMRC is not Changing my M1 Tax Code?
The situation can be common for one in every 10 UK people, but you don’t need to worry about it. HMRC has to share millions of tax codes with millions of taxpayers, and sending the wrong tax code is very common. But the good news is that even if you have paid more taxes than you owe, HMRC will rebate them. Staying transparent with HMRC can also help you remain tax-efficient and not be penalised for having a low income.
Can You Manage Your M1 Tax Code?
Have you changed employment but are still subject to the M1 tax code? No worries. You can follow the steps below to address the situation.
If you have switched jobs to a new company, you can ask your employer to help you.
If they can’t help you, you can contact HMRC online or call them to revise the tax code.
However, if the case remains the same until the end of the tax year, you will qualify for a rebate by HMRC. Once HM Revenue and Customs confirms your employer returns, they will automatically repay you the refund. Typically, you will get the payment between June and July after the tax year has concluded.
Can you wait this long for HMRC’s system? There’s a solution to this situation. You can claim your refund through their website and request a prior refund before June. You can also apply for your refund via the R38 form.
M1 Tax Code – Not Always A State Of Emergency
Some see the M1 tax code as a mystery, but it’s sometimes different. It is usually assigned when an individual starts a new job without a P45 form. Then, HMRC often assigns this code as a non-cumulative emergency code. This is primarily assigned to secure overpayment or underpayment. Remember that this code is issued based on the current month’s income and does not depend upon the income or allowances you previously earned.
If the incorrect tax payment situation happens, HMRC will send the correct code and repay you the amount you paid out of tax.