Tax Code OT W | What It Means and How It Affects Your Pay?

Understanding your tax code is crucial to ensuring you’re not overpaying or underpaying tax. For many UK employees, a standard code ensures that the correct amount of personal allowance is applied each year.

However, if you’ve noticed your payslip showing tax code OT W, it might be affecting your take-home pay more than you realise. This guide explores what the code means, why it may be applied, and how you can correct it.

What Is Tax Code OT W and Why Might It Be Applied?

Tax code OT W is one of several emergency or temporary tax codes used by HMRC when there is insufficient information about an employee’s tax history.

The code is made up of two parts: ‘OT’ and ‘W’. ‘OT’ stands for “Other Tax”, which means no personal allowance is being applied.

The personal allowance, which in the 2024/25 tax year is £12,570, allows individuals to earn this amount tax-free. When OT is used, however, the tax is applied to all earnings from the first pound.

The ‘W’ stands for ‘Week 1’ and refers to a non-cumulative method of tax calculation.

Each pay period (usually weekly) is treated as an isolated instance, meaning your employer doesn’t consider your previous earnings or tax paid during the year.

This method is typically used when someone starts a new job mid-year and their full tax history is not yet available to HMRC.

Tax code OT W may be used when:

• An employee has not supplied a P45 after changing jobs.
• The new starter checklist hasn’t been completed or returned.
• There are multiple concurrent employments, making it difficult to establish the correct tax-free allowance.
• An employee joins a new contract via an umbrella company and tax details haven’t transferred yet.

Employers are instructed to use this code to ensure they’re fulfilling their legal obligation to deduct the appropriate tax, even if the employee’s full financial circumstances are not yet known.

How Does Tax Code OT W Affect Your Take-Home Pay?

Because tax code OT W applies no personal allowance, it leads to higher tax deductions. This can significantly impact how much money an employee receives each pay period.

Without the standard tax-free allowance, the entire income is subject to income tax. As a result, employees may see a noticeable reduction in their take-home pay compared to those on standard tax codes like 1257L.

Below is a comparison of typical deductions under the OT W code versus the standard 1257L code.

Tax Deduction Example by Code

In this example, the difference in tax deducted remains consistent because the £12,570 allowance is not applied under OT W.

As a result, anyone on this code will likely overpay tax if the situation isn’t corrected promptly.

What Are the UK Income Tax Rates Used Under Tax Code OT W?

Even though OT W is a temporary or emergency code, the tax bands applied are still the same standard income tax rates defined by the UK government.

However, under OT W, these rates apply to all of the individual’s income with no tax-free threshold.

The income tax bands differ between England, Wales, Northern Ireland, and Scotland. Here’s how they compare:

Income Tax Rates Under Tax Code OT W

For England, Wales & Northern Ireland:

For Scotland:

These rates are applied directly to the gross income with no deductions for personal allowance, making the effective tax burden higher for those temporarily on OT W.

Is Tax Code OT W the Same as 0T, W1, or M1?

Although they may appear similar on payslips, tax codes OT, OT W, W1, and M1 have distinct meanings and implications for how your income is taxed.

Understanding these differences is essential because the wrong assumption could lead to either overpaying or underpaying tax, which might not be corrected until the end of the tax year — or even later.

Breaking Down Each Code

• OT (Other Tax): This is a basic tax code that does not apply any personal allowance. It means all of your earnings are taxed from the first pound without the £12,570 tax-free threshold. OT is typically used when HMRC or your employer does not have enough information to apply the correct tax code — for example, if you didn’t provide a P45 or fill out a starter checklist. OT can be cumulative or non-cumulative, depending on how it’s applied.
• W1 (Week 1): This is a non-cumulative tax code indicator. It treats each week’s income as a new starting point, ignoring previous income or tax deductions from earlier in the year. W1 is often seen alongside emergency codes and is meant to be a temporary measure until your full employment and tax history is confirmed. It prevents any back-calculation and assumes no prior income or tax was paid.
• M1 (Month 1): Similar to W1, M1 stands for Month 1 and applies the same non-cumulative principle to employees paid monthly. This means the payroll system will only look at the current month’s earnings when calculating your tax and won’t adjust for what you’ve already earned or paid in tax earlier in the year. This is why you might notice fluctuating deductions even if your gross salary remains constant.
• OT W / OT M: These codes combine the two concepts: no personal allowance (from OT) and non-cumulative tax calculation (from W1 or M1).
  • OT W1 = OT applied on a weekly basis, non-cumulative.
  • OT M1 = OT applied on a monthly basis, non-cumulative.

These are typically assigned to new starters, temporary employees, umbrella workers, or individuals who fail to submit necessary tax documents.

Why the Distinction Matters?

While all these codes can result in higher-than-expected tax deductions, they are applied in different contexts and have different outcomes:

In practice, OT W and OT M are among the most penalising tax codes for take-home pay, as they not only ignore previous income but also apply tax from the first penny earned without any allowance.

However, they are designed to protect the tax system and ensure compliance while HMRC gathers the full employment picture.

Why Have I Been Put on a Tax Code OT W?

HMRC assigns OT W primarily when they cannot determine the correct tax code due to missing or incomplete information. This often happens when an employee starts a new job but fails to provide their employer with:

• A recent P45 from their previous employment
• A starter checklist if no P45 is available

In some cases, employers may not receive prompt instructions from HMRC, especially if there is a delay in processing employment changes. Employees with multiple jobs or secondary income sources are also likely to be affected.

Additionally, umbrella companies may temporarily place contractors and freelancers on OT W as a precautionary measure until their income history is confirmed. This ensures that tax is being paid while awaiting the correct code.

The longer the OT W code is used without resolution, the more likely it is that the employee will significantly overpay tax.

How Can I Change or Correct My OT W Tax Code?

Correcting your tax code is typically straightforward, provided the correct information is supplied promptly.

The most important step is providing either a P45 or completing a starter checklist for your employer.

Once your employer submits this information, HMRC will reassess your tax situation and issue a new, more accurate tax code.

You should also check your tax code regularly through the HMRC Personal Tax Account, which provides up-to-date details of your current code and allows you to report discrepancies.

If your tax code has not been corrected after multiple pay periods, you can contact HMRC directly by phone or submit a request online. Keep records of your payslips and employment history to help HMRC investigate.

Can I Claim Back Overpaid Tax If I Was on OT W?

Yes, overpayments caused by an incorrect tax code like OT W are usually eligible for a refund. There are two main ways this can happen:

1. Automatic adjustment: Once the correct tax code is applied, the overpaid amount is usually refunded through payroll in subsequent payslips.
2. Manual claim: If the tax year ends and the correction hasn’t occurred, you can submit a tax refund claim directly to HMRC using form P50 or through your Personal Tax Account.

Refunds typically take around 8–12 weeks, though some claims may be processed sooner. It’s advisable to act quickly at the end of the tax year if you suspect overpayment.

Conclusion

While tax code OT W may seem temporary or harmless, it can result in hundreds of pounds in overpaid tax if left uncorrected.

Knowing what this code means, why it’s applied, and how to fix it is crucial for ensuring you receive your full take-home pay.

If you notice this code on your payslip, act quickly to correct it with your employer or HMRC. Understanding your tax situation puts you in control and ensures you’re not giving away more of your hard-earned money than necessary.

FAQs

What does the “W” in tax code OT W stand for?

The “W” refers to “Week 1”, indicating a non-cumulative tax code where income is taxed weekly, without reference to previous earnings in the tax year.

Can you avoid being put on tax code OT W when changing jobs?

Yes, by providing your new employer with a recent P45 or by filling in the HMRC starter checklist, you can often prevent the use of emergency codes.

Will I automatically be removed from tax code OT W?

Usually yes. Once HMRC receives the necessary information, they’ll issue a revised tax code to your employer and your tax will be adjusted accordingly.

Is tax code OT W more common with umbrella companies?

Yes. Umbrella workers often deal with irregular contracts, which increases the likelihood of being assigned temporary or emergency tax codes like OT W.

How do I check my current tax code?

You can find your tax code on your payslip or log in to your Personal Tax Account on the HMRC website.

What happens if I ignore a tax code OT W?

If left uncorrected, you may overpay tax throughout the year. You’ll likely need to claim a refund after the tax year ends.

Does being on OT W affect student loan repayments?

Yes. Since your income is taxed from the first pound earned, student loan deductions could also begin sooner than they would under a standard tax code.