If you have been given a tax code notice and you are wondering ‘what does tax code BR mean?’ then here is an explanation.
The tax code letter BR stands for Basic Rate. This means that any earnings that you get under the employment (or pension) that has that tax code (and you may have different tax codes for different sources of income), will be subject to tax at the basic rate.
For the tax year 2018/19 the basic rate of tax is 20%.
Tax codes often have a number before them and then a letter but in this instance, as the number refers to how much personal allowance you have, there is no number, just the letters BR.
Normally you will be given a personal allowance (£11,850 for 2018/19) which means that you can earn that amount of money over the tax year without being charged tax on it.
So, with a tax code of BR, that personal allowance will not be applied to the earnings from that source. It may well be that your personal allowance has been used up elsewhere (another job for instance or another pension source) so you cannot also apply it to this source of income.
So if for example you earn £1600 in a month then you will be taxed £320 (20% of £1600) for that month.
In fact even if you earn enough that your earnings would normally be taxed at a higher rate then you will still be taxed at 20% on this tax code and any adjustments will either need to be made once the tax code is changed or through your tax return.
The tax code BR differs from the code 0T in that if you are on 0T you will be charged higher rate tax if your earnings enter into that bracket.
It is possible that you have been given this tax code incorrectly (if you have been given it and you don’t have any other source of income for example). In which case you should get in contact with HMRC as soon as possible so that you don’t end up paying too much tax.
You can call HMRC on 0300 200 3300.
Hi I have recently started a new job with an employment agency and I am being taxed at BR rate which is 20%,I do have an income of £7,151 from a previous employers pension scheme which has a tax code of 750L am I being being taxed correctly? Rgegards Michael.
Hi Michael, thanks for your comment. If you have a tax code of 750L on your pension then that means you are entitled to earn £7500 before paying tax. This is not the standard personal allowance so that may indicate that is it taking account of some other tax you owe from last year or some other taxable earnings. It is common for second incomes to have a tax code of BR due to the first income taking up all of your personal allowance. As I am not a tax advisor I cannot confirm whether this is correct for yourself and your circumstances though. If you think it may be wrong you can call HMRC to check. You can also ask for your personal allowance to be split over the two jobs if both of them pay below your allowance (it looks like your pension is slightly below).
Throughout my working career the UK Government have pushed all of us towards taken a work based pension scheme out. Having now retired the tax taken off these work based pension is not what I expected, all because my pensions are over the income tax threshold. With the cost of living this tax should be removed after pension age. Then again its more money for the government coffers!
Hi Colin, yes the pensions are classed as earned income and taxed accordingly. However, when contributions are made to pension schemes, tax relief is given at the highest rate so it is a tax efficient way of saving. Also, you often get employers paying towards your work based pension so that is another advantage.
Hi, I ‘am Lina I wanted to clarify about taxes, I’’am a pensioner and I’m quite comfused with the taxes thats being deducted from my pension. I was given a BR tax code for my NHS pension. Im also receiving state pension, ‘ am taxed for both pension? I don’t have a tax code for my state pension so I don’t know if I’am being tax for that as well. My total pension on both is 972.45/ mo, I’am receiving as well a pension from pension scheme from my husbands pension. Kindly explain why I’am paying tax, with income of less than 1thousand / mo.
Hi Lina, and apologies for the delay in replying. Tax is payable on all pension ‘earnings’ over £12,570 per year so if your 3 pensions come above that level you will be taxed accordingly. You mention that the 2 pensions come to less than £1k so maybe the amount from your husband’s pension puts it over the personal allowance? The BR tax code is an emergency rate that is applied when the entity paying that pension does not know how much tax to deduct and has been instructed to use this by HMRC. It should be corrected in time, but if not corrected by the end of the tax year you may need to reclaim some tax. You can call HMRC (if you can get through) to see why they have put you on the BR tax code. Good luck.