What is a OT Tax Code? HMRC’s Tax Alarm Explained

PHS Team

22 Apr, 2025

If you've recently checked your payslip and noticed an OT tax code, you might wonder what is a OT tax code and why it's there. The OT tax code is often a surprise for many, as it signals a tax situation that requires immediate attention. 

Essentially, it means you’re being taxed on all of your income, with no personal allowance applied, which can lead to higher deductions. In some cases, you may be entitled to an OT tax code refund if it's been applied in error or corrected later.

Whether you're just starting a new job or dealing with missing paperwork, we've got everything you need to know.

What is a OT Tax Code?

The OT tax code means you will be taxed on all of your income without any personal allowance. This means there is no tax-free amount you can earn. If you are on the OT tax code, you’ll pay more tax than someone on a regular tax code that gives you a personal allowance.

The OT tax code is usually applied when HMRC doesn't have enough information to work out the correct tax code for you. If this happens, you may be due an OT tax code refund once your correct tax code is established and any overpaid tax is calculated.

Why Does HMRC Apply the OT Tax Code?

There are several reasons why HMRC might apply the OT tax code to your income. Here are the most common reasons:

• Missing P45 Checklist: When you start a new job, your previous employer may have given you a P45 form. If you don’t have this form or if you haven’t completed a starter checklist, HMRC won’t know how much tax-free income you should receive. This often leads to the OT tax code being used.
   
• Earnings Exceed the Personal Allowance: If your earnings are higher than the personal allowance, you may end up on the OT tax code. The personal allowance is the amount of money you can earn each year without paying tax. For 2025, this amount is £12,570. If you earn more than this, you’ll need to pay tax on the extra income.
   
• Multiple Jobs or Pensions: If you have more than one job or pension, HMRC may not know how much personal allowance to apply to each. This can also result in the OT tax code being used.
   
• Unresolved Tax Affairs: If there are issues with your tax records or if HMRC is waiting for you to submit additional information, you may be put on the OT tax code until everything is sorted.

What is the Difference Between OT and BR Tax Codes?

If you’ve been given the OT tax code, you might wonder how it compares to other tax codes, such as the BR tax code. The main difference is:

How Much Tax Do You Pay on an OT Tax Code?

The tax rates you pay on the OT tax code are the same as the usual tax rates but with no personal allowance applied. This means:

• Basic rate (20%): Taxed on income up to £50,270.
• Higher rate (40%): Taxed on income between £50,271 and £125,140.
• Additional rate (45%): Taxed on income above £125,140.

Here’s an example of how much tax you might pay on an OT tax code:

As you can see, you pay a higher percentage on earnings over certain thresholds, and with no personal allowance, you’ll pay more tax compared to those with a standard tax code.

How to Fix an OT Tax Code

If you find that you're on the OT tax code and it doesn’t seem right, you can fix it. Here’s how to do it:

1. Verify the OT tax code on your payslip to ensure it's correct.
2. Call HMRC to provide the necessary details like your P45 or starter checklist.
3. Give your employer a P45 or complete a starter checklist if you've started a new job.
4. Once corrected, HMRC will send a new tax code, and any overpaid tax will be refunded.

What If You Overpay Tax on an OT Code?

If you’re on the OT tax code and end up paying too much tax, don’t worry. There are ways to get your money back:

1. If you've paid too much tax, you may be eligible for an OT tax code refund. 
2. You can contact HMRC and ask for a refund, or it might happen automatically at the end of the tax year.
3. If you’re required to file a self-assessment tax return, you can include the overpaid tax as part of your return. 
4. HMRC will calculate whether you’ve paid too much and issue a refund if necessary.
5. At the end of the tax year, HMRC will usually check your total income and tax paid. If you've paid more tax than needed, you may get a refund.

HMRC may apply OT tax code if they don’t have enough information about your earnings or tax history. If you're on this code, it’s important to check your payslips, contact HMRC if needed, and update your records to ensure you're paying the right amount of tax. If you overpay, you can claim a refund.

How Can PHS Associates Help You?

If you’re struggling with your tax code or want help understanding what is a OT tax code is and how it affects your pay, PHS Associates can assist you. Our expert team can help you understand your OT tax code, ensure it is correct, and fix any errors.

If you've overpaid tax, including an OT tax code refund, we can guide you through the process of claiming it back.  We also provide expert advice on tax planning and dealing with HMRC, ensuring you don’t pay more tax than necessary. Contact us at 0208 8611685 and email us at info@phs-uk.co.uk. With our support, you can stay on top of your tax affairs with confidence.