Tax Category Tax: calculations, VAT, self-employment tips and more

How to Calculate Emergency Tax

Emergency tax in the United Kingdom applies when HM Revenue & Customs do not have enough personal information to provide you with the correct tax code. Emergency tax means that you may pay more tax than you should, but it will be refunded to you once HMRC has the correct information. You may have to pay emergency tax if you start a new job and don't have a P45, or if you commence new employment and were previously self-employed.

Emergency tax codes are calculated by applying your annual personal allowance (£6,475 for tax year April 6, 2010 to April 5, 20110) and dividing it by 10. The first three numbers are used followed by the letter "L" to give an emergency tax code of 647L. Your tax code is given to your employer and is used to calculate the amount of emergenct tax you pay.

Find out your gross monthly or weekly income to calculate your emergency tax. You can get this from your most recent payslip.

Check your emergency tax code shown on your payslip. For the UK tax year April 6, 2010 to April 5, 2011, it will be 647L meaning you can earn up to £6,475 during the tax year free of tax.

Divide £6,475 by 12. You get £540 (rounded up). This is the amount you can earn tax free each month. If you get paid weekly divide £6,475 by 52 to get £125 (rounded up).

Subtract the weekly or monthly tax free amount from your gross earnings. For example, if your gross monthly income is £2,000 deduct £540 to get £1,460. This is the amount that will be used for tax purposes.

Multiply £1,460 by 20 per cent. This is the basic rate of tax in the UK. You get a result of £292. This is the amount of emergency tax you pay for the month.


  • The method of calculation in the steps does not take account of any pension contributions you may be making. These are tax deductible and should be subtracted from your gross income before you calculate your emergency tax. If your annual income exceeds £37,500 for the tax year April 6, 2010 to April 5, 2011, you will pay 40 per cent on earnings above this limit. If you earn more than £150,000, you will pay 50 per cent on income in excess of the aforesaid amount.