The 0T tax code explained

The 0T tax code means you get no tax-free Personal Allowance from that job or pension. Every pound you earn there is taxed, starting at 20 per cent, then 40 per cent and 45 per cent as you move through the bands. HMRC uses 0T when your allowance has been used up elsewhere, when it has been tapered away because your income is over £125,140, or when a new employer has no information about you. In the first two cases it is correct; in the third it is a stopgap that should be replaced.

What 0T does to your pay

On 1257L, payroll gives you £1,048 of tax-free pay a month before charging tax. On 0T that figure is zero.

Monthly pay	Tax on 1257L	Tax on 0T	Difference
£2,000	about £190	£400	about £210
£2,500	about £290	£500	about £210
£3,000	about £390	£600	about £210

These are England figures for someone well inside the basic rate band. The gap is roughly £210 a month because 20 per cent of £1,048 is about £210. The take-home pay calculator shows the full effect on your net pay, including National Insurance, which 0T does not change.

The basic rate band still applies on 0T. Because there is no allowance in front of it, the 40 per cent rate starts once your pay from that job passes £37,700 a year, not £50,270. Scottish taxpayers have S0T, which applies the Scottish bands from the first pound. Welsh taxpayers have C0T.

When 0T is correct

There are two situations where 0T is the right code:

• You have more than one job or pension, and your full allowance is already used by another. HMRC may then put 0T on the second source. More often it uses BR or D0, which tax at a flat rate; see the D0 and D1 tax codes guide.
• Your adjusted net income is £125,140 or more. Your allowance falls by £1 for every £2 above £100,000 and is gone by £125,140, so there is nothing to give you. Senior consultants and some school leaders get 0T for this reason. The Personal Allowance guide explains the taper.

Between £100,000 and £125,140 you would normally see a reduced code (lower than 1257L) instead of 0T, because you still have part of the allowance.

When 0T is a stopgap

Payroll uses 0T when it has to pay you but has nothing to go on: no P45, no starter checklist or an incomplete one, and no code from HMRC yet. It is usually applied on a non-cumulative basis, shown as 0T M1 or 0T W1, so each payday is taxed on its own with no allowance at all.

This is common when you start a job and the new starter paperwork is still in a pile, or when a pension starts and the pension provider has not received your details. HMRC also uses 0T when it has an employment on your record but cannot tell which job is your main one.

If you do not fill in the starter checklist, payroll is told to use 0T, so completing it on your first day is the quickest way to avoid a month on 0T. If you do have a P45, give it to payroll as soon as you can; the emergency tax codes guide covers the paperwork.

Getting a wrong 0T changed

1. Check your HMRC personal tax account or the HMRC app. Look at which job or pension holds your allowance and what income HMRC expects from each.
2. If the allowance is on the wrong source, or a job you have left is still showing, update it there or contact HMRC.
3. Tell payroll you have done this. They cannot change your code themselves, but they will apply the new one as soon as HMRC sends it.

Once a cumulative code arrives, payroll recalculates the year to date and refunds overpaid tax in the next pay run. If you stayed on 0T M1 until the end of the tax year, HMRC reconciles your record after 5 April. HMRC personal tax account explains how to sign in and what you can change.