What is the M1 Tax Code? How Does It Change Your Take-Home Pay

Have you recently checked your payslip and seen the letter M1? If you have seen this M1 tax code, it might have confused you. Seeing this code on your payslip can sometimes reduce your take-home pay temporarily. This can be alarming, but you don’t need to stress about it. The M1 code is a temporary emergency tax code that HM Revenue and Customs (HMRC) uses when they don’t have enough information about your total annual income. Let’s explain this tax code in detail to understand how it affects your salary, why you are assigned this code, and how to restore your standard tax code.

What is the M1 Tax Code?

The M1 code (month 1 basis) is an emergency tax code that HMRC assigns as a short-term measure. HMRC uses this code when it doesn’t have sufficient information about your income. It tells employers that Income Tax must be calculated on a non-cumulative basis. This means it calculates your tax based on the current pay period and is temporary until your records are updated. HMRC gives this code usually when an employee starts a new job and doesn’t provide a P45. The ‘M1’ does not mean ‘month one off tax’. HMRC applies the M1 emergency tax code to ensure the correct amount of tax is collected temporarily until your records are updated.

What is a Standard Cumulative Tax Code?

In the UK, Income Tax is normally calculated through Pay As You Earn (PAYE). This normal way of calculating the tax is the standard cumulative tax code. This means an employer calculates tax based on the total pay and tax paid so far during the tax year, not just the current payslip.

What is Non-Cumulative M1 Code?

A non-cumulative M1 tax code means your tax is calculated based on the current payslip. It neglects how much you have paid or what you earned in the previous months. Your monthly tax-free allowance is capped strictly at 1/12th of your total Personal Allowance. Also, your tax bands are divided into separate monthly portions. For instance, let’s say that you have a tax-free Personal Allowance of £12,570, your emergency tax code may be 1257L M1. Since it's a non-cumulative code, tax is calculated from what you earn in that month. It won’t matter if you paid tax earlier or used the Personal Allowance when you have an emergency tax code.

Why Am I Given an M1 Tax Code?

If you are wondering why has my tax code suddenly changed to M1, you are not alone.  HMRC issues this code as a temporary measure to ensure you pay some taxes while your income information is being updated. You will likely see the M1 code for several reasons.

New Job Without a P45

If an employee started a new job and did not provide a P45 form from the previous employer, the employee is given an emergency code. An employee will be paid using an emergency M1 tax code.

Returning to Work After a Break

If you took a long, unpaid leave or were unemployed, your cumulative tax history has a gap. In this situation, you will be given an M1 emergency tax code.

Moving from Self-Employment to PAYE

When you switch from Self-Assessment to PAYE, HMRC does not have the instant payroll date that your new employer needs to tax your monthly salary. Do you want to know more about payroll and payroll numbers? Read our other blog on What Is Payroll Number on Payslip.

Multiple Streams of Income

You are assigned the M1 tax code when you have multiple sources of income. For example, having a second job can confuse the automated systems, resulting in an M1 designation.

Getting Company Benefits

You might be given an M1 emergency tax code if you start receiving company benefits or a state pension.

How Long Do You Stay On the M1 Tax Code?

You will stay on M1 emergency tax code until HMRC sends your employer an updated tax code. And, HMRC will send an updated tax code to your employer when you provide the correct income information to your employer. The timing depends on how quickly your employer updates HMRC with the correct payroll information. HMRC changes the emergency tax code once your employer sends its payroll details, you complete a starter checklist or provide the P45.

How to Change My M1 Tax Code?

Getting any emergency tax code, including M1, can be stressful if you are on it incorrectly. The good news is, it’s a temporary measure, and HMRC will alter it as soon as your information is updated. You can change the M1 code by providing the P45 from your previous employer. Ask for a P45 from your previous job and give it to your new employer as soon as possible. This can help take you off the emergency tax code, as it gives the new employer your details. Once the information is provided, HMRC will send an updated tax code to you and your new employer. You may remain on the M1 tax code until HMRC receives updated income information. Pay the correct amount of tax to change the emergency code to standard.

Is 1257L/M1 an Emergency Tax Code?

Yes, 1257L M1 is an emergency tax code due to the suffix M1. The first part, 1257L, shows that an employee is entitled to the standard tax-free Personal Allowance of £12,570. However, the second part, M1, acts as the emergency tax code. Whenever your tax code ends with M1, W1, or X, it means you are on an emergency tax code. If your tax code does not end with these codes, then you are not on an emergency tax code.

• M1 = Month 1 basis
• W1 = Week 1 basis
• X = emergency non-cumulative

Additionally, an M1code does not necessarily mean you are paying more tax overall. It simply means your tax is calculated separately for each paycheck, rather than cumulatively across the tax year.

How Much is Emergency Tax M1 HMRC?

In the UK, there is no single fixed amount for the M1 tax code. Instead, you pay a normal Income Tax under the normal income tax rules of the UK. Your tax is calculated using standard UK tax bands. However, it is calculated based on your current payslip. This means it looks at what you have earned that single month and avoids the tax you paid in previous months.

Could I be Due a Tax Rebate?

It is possible that you might end up on the wrong tax code. Being on the wrong tax code or M1 tax code can result in underpaying or overpaying Income Tax. However, if you pay more tax, you could be due a tax rebate. This can happen when there is a gap in employment earlier in the tax year, when you start your new job midway through the tax year, and when you have uneven income. Note: Give HMRC the information it needs before the issue becomes more complicated.

The Bottom Line

Noticing an M1 tax code on your payslip can be confusing because it can affect your pay. HMRC gives you this emergency code when there is no significant information about your annual income. However, it is a temporary measure to ensure that you pay some tax. If HMRC gets the information it needs, it will update the tax code and send it to you and your employer. You can submit your P45 or update your information directly on your online HMRC Personal Tax Account. This way, you can quickly restore your proper tax code and reclaim overpaid tax. If you are unsure about M1 tax codes and suspect you have been overtaxed, it is best to hire an expert. At MicroentityAccounts, we have professionals to help you review your situation. Our qualified accountants keep a close eye on your payslips and ensure you stay compliant. So what are you waiting for? Contact us today and let us handle it for you! Disclaimer: The information provided on MicroEntityAccounts.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.