Cumulative vs. non-cumulative tax codes: What's the difference?
Reviewed by Edward Waine, RIFT's Quality & Service Manager
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Reviewed by Edward Waine, RIFT's Quality & Service Manager
Understanding the difference between cumulative tax codes and non-cumulative codes is important for taxpayers, as it directly impacts how much tax you pay. Whether you're adjusting for changes in income or sorting out overpayments, knowing which tax code applies to you helps ensure you're not paying too much tax.
If you’re not sure about your tax code or think you’ve paid too much, we can help sort out your tax rebate quickly and easily.
Cumulative tax codes, like the common 1257L, work out your tax based on everything you’ve earned since the start of the tax year (6 April). It spreads your tax-free allowance evenly over the year and adjusts if you’ve paid too much or too little.
This helps keep things fair, especially if you get bonuses or change jobs, and lowers the chance of overpaying tax. But sometimes mistakes like missing income details can cause temporary issues.
A non-cumulative tax code, like 1257LX or 0T, calculates tax based only on your earnings for that pay period, not your total income for the year. This means each week or month is treated separately, without looking at what you’ve earned before.
These codes are often used in situations like starting a new job, when your employer doesn’t have full details yet, or if you’re on an emergency tax code. While it can lead to higher tax deductions initially, any overpayments can usually be refunded once your tax details are updated.
When it comes to a cumulative vs non-cumulative tax code, the main difference is how tax is calculated. A cumulative tax code looks at your total income for the year so far and adjusts for any overpayments or underpayments. In contrast, a non-cumulative tax code calculates tax only on what you earn in each pay period, ignoring earlier income.
Cumulative tax codes are great for balancing tax throughout the year, especially if your income changes. Non-cumulative codes are usually temporary, often used for new jobs or emergency tax.
Think you’ve been paying the wrong amount of tax? Find out how much you could be owed with our handy tax rebate calculator.
A non-cumulative tax code is usually assigned in specific situations, like when you start a new job, change employers without providing a P45 or if HMRC doesn’t have enough information about your earnings.
It’s also common if you're on emergency tax while waiting for your details to be updated. Non-cumulative codes are often temporary, but they can result in paying more tax than necessary until they’re corrected.
To change your non-cumulative tax code, you’ll need to contact HMRC. They’ll ask for details about your income, such as your P45 from a previous job or other earnings. Once they’ve reviewed your information, they’ll update your tax code and let your employer know.
If you’re unsure what to do or think you’ve overpaid, we can help you get your money back.
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