If the company you work for does not know what tax code to put you on, you may be placed on an emergency tax code. Often, if you are put on an emergency tax code you overpay tax. If you overpay tax you can claim a tax rebate.
What is the Emergency Tax Rate?
If you are an on an emergency tax rate you will be paying 20% tax. This may sound the same as the basic tax rate but the difference is, that on an emergency tax code you are not given a personal allowance.
Everyone that works in the UK is given a tax free allowance, this is the amount that you can earn before you need to pay any tax. The current tax free allowance is £6,475 for the 2010/11 tax year and your tax code is used to allocate your personal allowance in each pay packet that you receive. If you are paying the emergency tax rate this allowance will not be allocated and you will pay 20% on all your wages.
How to Ensure you are not paying the Emergency Tax Rate
If you have second job, you should normally be put on an emergency tax code. Often people are incorrectly put on an emergency tax code if they only have one job and they end up overpaying tax.
One way to try and avoid paying emergency tax is to ensure that you give any new employers your P45 as soon as you start working. This will enable them to put you on the correct tax code, taking into account your previous job.
If you have any questions about emergency tax, please leave them in the comments below.