Why is there a negative tax figure on my payslip?

It is one of the most common questions we receive from UK employees: "Why is my tax a minus number? Have I done something wrong?" The short answer is no. A negative tax figure is simply the payroll software's way of giving you a tax refund.

How does a negative tax deduction work?

On a standard payslip, anything listed under the "Deductions" column is money being taken away from your gross pay. So, if your tax is listed as £200, that is £200 subtracted from your bank deposit.

However, when the payroll software calculates that you have overpaid tax in previous months, it needs to give that money back to you. Because it cannot put the money in the "Earnings" column (since a tax refund isn't technically earned income), it puts a minus sign next to the deduction.

Mathematically, subtracting a negative number adds it to your total. So a deduction of -£150.00 means £150 is being added to your final take-home pay.

The 3 most common reasons for a negative tax figure

The UK PAYE (Pay As You Earn) system is "cumulative". This means that every single time you are paid, the payroll software recalculates your tax for the entire year to date, not just that specific month. If it finds you have paid too much previously, it auto-corrects immediately. Here is why that usually happens:

1. You were on an emergency tax code and it just got fixed

This is the number one cause. When you start a new job, if your employer doesn't have your P45, they will often put you on an emergency tax code (like 0T or BR). These codes assume you have no tax-free Personal Allowance, meaning you get taxed 20% on every single penny you earn.

Once HMRC receives your starter checklist or P45, they issue your correct code (usually 1257L for the 2026/27 tax year). The next time payroll runs, the software recalculates your wages using your new £12,570 tax-free allowance. It realises you paid hundreds of pounds too much in your first few weeks, and refunds it all at once via a negative tax deduction.

2. Your salary dropped or you took unpaid leave

Because your £12,570 tax-free allowance is spread evenly across the 12 months of the year (£1,047.50 per month), your tax is calculated on the assumption you will earn the same amount every month.

If you take a period of unpaid leave, or if your variable hours drop significantly, your cumulative earnings for the year might fall below the tax threshold for that specific point in the calendar. The PAYE system sees that you are now "ahead" on your tax payments, and refunds the difference.

3. You claimed a work-related expense (like a uniform rebate)

If you recently successfully applied to HMRC for a work-from-home allowance, a uniform tax rebate, or a professional subscription rebate, HMRC will increase your tax code (for example, changing it from 1257L to 1288L). This higher code gives you a larger tax-free allowance. When the new code is applied to your payslip, the system refunds any tax you overpaid earlier in the year.

Can I get a negative National Insurance figure?

Yes, but it is much rarer. Unlike Income Tax, National Insurance (NI) is usually calculated strictly on a "per-period" basis (week-by-week or month-by-month). If you earn a lot one month and nothing the next, NI does not normally auto-correct.

However, company directors have their NI calculated cumulatively over the year. If you are a director, you might see a negative NI figure if your cumulative earnings drop. For regular employees, a negative NI figure usually only happens if your employer made a manual administrative error in a previous month and is reversing it.

Do I need to do anything?

No. A negative tax figure means the system is working perfectly. HMRC and your employer have successfully identified an overpayment and the money is being returned directly to your bank account along with your normal wages. You do not need to call HMRC or claim a separate refund.

However, you should always check the "Tax Code" box on that same payslip. Make sure it has changed to a standard cumulative code (like 1257L). If it still has a W1 or M1 next to it, the system is still treating you on a temporary basis, and you may need to contact HMRC to get it permanently fixed.

Frequently Asked Questions