Tax Code D1 Explained

The income profile D1 is built for

D1 makes sense only when your other income is already above £125,140. At that level your Personal Allowance has been fully withdrawn, so your main job is normally coded 0T, and every extra pound is taxed at 45%. HMRC’s PAYE Manual says 0T is used when the allowance has been tapered to nil.

Example: a £150,000 main salary on 0T and a £20,000 non-executive fee on D1. The fee is all additional-rate income, so D1’s £9,000 is exactly right. The manual tables put it simply: for D1, multiply the whole pay by 0.45.

Why D1 is the wrong fix between £100,000 and £125,140

Between £100,000 and £125,140, no flat-rate code fits. Every £2 of extra income removes £1 of allowance, so the real marginal rate is 60%. Take £95,000 from a main job and £20,000 from a second one. Your total of £115,000 leaves an allowance of £5,070. The tax actually caused by the second job is £11,000.

D0 would take only £8,000 and D1 £9,000. HMRC normally deals with this by reducing the main job’s code (often with a T suffix) to reflect the tapered allowance, and leaving a flat-rate code on the second job.

Scottish and Welsh versions

Wales uses CD1 at 45%, the same as England and Northern Ireland. Scotland has no D1 at 45%. There, SD1 is the 42% higher rate, SD2 the 45% advanced rate and SD3 the 48% top rate. A Scottish taxpayer with income above £125,140 should see SD3 on a second source, not SD2.

HMRC’s systems use week 1 / month 1 for D1 by default, as with D0. Week 1 / month 1 stops payroll from refunding during the year, so an overpayment is corrected by a new cumulative code or by P800 after the year ends.

Checks worth doing at this income level

• Make sure HMRC’s estimate of your main income is current. A bonus that won’t be repeated can leave you on D1 the following year when D0 would be right.
• If you also file a Self Assessment return, the tax taken under D1 is credited against your final bill, so check that the P60 figures match your return.

Second income of £20,000: what each code takes

The table shows the extra tax a £20,000 second income really causes at three main-income levels in England, next to what D0 and D1 would deduct. Only at the top level does D1 match. At £120,000, part of the second income falls in the taper zone and part above £125,140, so the true cost is more than D1 takes. At £95,000, the taper makes the true cost higher than either flat rate.

How to check D1 on a payslip or P60

D1 tax should be exactly 45% of the period’s taxable pay: £450 on £1,000, for example. Your P60 for the second job will show code D1 and total tax of 45% of the year’s taxable pay from that source. If the main job’s P60 shows a code with an allowance while your income was above £125,140, the main job under-deducted, and the difference will be collected after the year ends.

A late bonus that pushes you over £125,140

Timing matters at this income level. If a March bonus takes your total over £125,140, a second source that was correctly on D0 should have been on D1 for the whole year. HMRC’s manual says the last date it can issue a code to an employer is 13 March, so there’s often no time to change it. The shortfall – 5% of the second income, plus the effect of losing the rest of your allowance – is collected after 5 April through a P800 or your tax return.