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If you have more than one tax code

If you've got several sources of employment or pension income that are taxed through PAYE (Pay As You Earn) at the same time it can get confusing. So it's very important that you check your tax codes carefully to make sure you're paying the right tax.  

When you might have more than one tax code

It's likely that you'll have more than one tax code if you have:

  • two or more jobs at the same time
  • income from two or more pensions
  • pension income and a job

You'll know if you have more than one because HM Revenue and Customs (HMRC) sends you a 'PAYE Coding Notice' for each job or pension. Your PAYE Coding Notice tells you what your tax code is and how HMRC have worked it out.  

Understanding tax codes from different jobs or pensions

You should get a tax code for each job or company pension. This tells each employer or pension provider how many tax allowances you get. But your Personal Allowance - and therefore your tax-free pay - will normally only apply to your main job or pension.

If you pay tax at basic rate (20 per cent) you'll be given a 'BR code' for your second job or pension - this means that you pay basic rate tax on all your income from this employer or pension payer. If you pay higher rate tax (40 per cent) you'll be given a 'D0 code' for your second job or pension and you'll pay higher rate tax on that income.

See the later section 'PAYE Coding Notice entries explained' to understand more about these codes.

If you pay additional rate tax (50 per cent) you’ll be given a ‘D1 code’ for your second job or pension and you’ll pay the additional rate tax on that income. For more information read the section 'If your income is above £150,000'.

If your income is above £150,000

For 2010-11 your tax code will not have taken into account the new 50 per cent tax rate (and this will not be reflected on your PAYE Coding Notice). This means that if you have more than one job or pension your tax deductions may not be accurate. HM Revenue & Customs (HMRC) will work out how much tax you are actually due to pay when you send in your 2010-11 Self Assessment tax return. This may mean you'll owe some extra tax or you'll be due a refund.

From 2011-12 your new tax code will take into account the 50 per cent tax rate and any ‘reliefs and adjustments’ to collect the correct amount of tax.

If you don’t normally complete a Self Assessment tax return, and you become aware during the tax year that you need to complete one, follow the link below to register for Self Assessment.

Sharing your Personal Allowance between jobs/pensions

Avoid paying too much tax if you don't pay tax on your main job

Income Tax rates and allowances

Check up-to-date figures for personal allowances from HM Revenue & Customs

If you don't pay tax on your earnings from your main job and you're not using all of your Personal Allowance you can tell HMRC to use what's left in your second job. If you don't do this you could end up paying too much tax. You can share your Personal Allowance across several jobs or pensions until it's all used up.

Example: your Personal Allowance is £7,475 (tax year 2011-12) and you have PAYE income from two jobs - income of £3,500 from your main job and income of £1,500 from your second job. You can tell HMRC to use £3,975 of your unused Personal Allowance (£7,475 less £3,500) from your main job against your income from your second job so that you don't have to pay tax on either income.

Sharing your Personal Allowance if you pay tax on your main job

You can choose to share your Personal Allowance across more than one job or pension even if your allowances would normally be used up through the main source of income. However if you do this the amount of tax you pay won't change - but it may be simpler for you to pay the tax that you owe against only one wage.

Example: your Personal Allowance is £7,475 (tax year 2011-12) and you have PAYE income from two jobs - income of £16,000 from your main job and income of £500 from your second job. You can tell HMRC to use £500 of your Personal Allowance against your income from your second job so that you receive it free of tax and use the remaining £6,975 against your income from your main job.

Checking your tax codes

Your tax code tells you how many allowances you have and what they are. Check that the different letters and numbers that make up your tax codes are right. This is really important if you've got more than one job or pension.

Common PAYE Coding Notice entries explained

If you have more than one job or pension, you'll get more than one PAYE Coding Notice. Common entries which may appear when you have more than one tax code are explained below.

BR code

You'll see this on a PAYE Coding Notice for a second or additional job or pension if you pay tax at the basic rate. A BR code means you pay tax at 20 per cent on all of your second or additional earnings or pension income because your tax-free Personal Allowance has already been used up on your main job or pension.

For example, you may get £5,000 from a second pension and pay £1,000 in tax (20 per cent of £5,000).

D0 code

HMRC uses a D0 code if you pay tax at the higher rate and have more than one job or pension. A D0 code means you pay tax at 40 per cent on all of your second or additional earnings or pension income because you've already used your allowances - including your basic rate allowance - in your tax code for your main job or pension.

For example, you may earn £15,000 in your second job and pay £6,000 in tax (40 per cent of £15,000).

D1 code

HMRC will use a D1 code if you pay tax at the additional rate and have more than one job or pension. A D1 code means you pay tax at 50 per cent on all your second or additional earnings or pension income because you’ve used your allowances – including your basic and higher rate allowance - in your tax code for your main job or pension.

For example, you may earn £20,000 in your second job and pay £10,000 in tax (50 per cent of £20,000).

Adjustment to 20 per cent band

You may see this if:

  • you have two or more jobs at the same time
  • your income from your main job (the one where you're using your tax-free allowances) does not go into the higher rate tax band
  • you have the BR code for your second job but your combined income from your main and second jobs means that you should be paying some tax at the higher rate

Example: you have two jobs and earn £25,000 in each. You pay basic rate tax in each job because separately each salary is within the basic rate band. However, the joint income - £50,000 - takes you into the higher rate tax band. HMRC uses the adjustment to 20 per cent band to make sure you pay the correct amount of additional tax needed.

(If you pay higher rate tax on the income from your main job or pension then the adjustment isn't needed - instead HMRC gives you a D0 code for the second job or pension and all your income from it will be taxed at higher rate. If you pay additional rate tax read the section 'If your income is above £150,000'.)

Other earnings (or pension)

You'll see this used with your main job or pension. It tells you that you have used some of your tax-free allowances in another job or pension.  

Balance of Tax Allowances

You'll see this used with your second job or pension. It tells you that you are using some of your tax-free allowances in this job or pension.

If you think your tax code is wrong

If you think your tax code is wrong you must tell your Tax Office as soon as possible so they can correct it. You may get some tax back - or you might have to pay a bit more.

More useful links

Tax evasion

People who don't pay their fair share of tax are being unfair on the rest of us.

 

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