MARTIN Lewis has urged workers to check their tax code for a mistake that could cost you thousands.
A tax code is used by your employer or pension provider to work out how much income tax to take from your pay or pension.
Martin Lewis has urged workers to check the code on their payslip
In the latest Martin Lewis MoneySavingExpert (MSE) newsletter, the team said millions are on the wrong one and could be either overpaying or underpaying.
So while this means you might get money back from the tax man if you’ve overpaid, you might also have to pay some back if you’ve underpaid.
MSE is reminding workers it is their responsibility to make sure their tax code is correct.
What is a tax code?
Simply put, your tax code is the code used to figure out how much of your pay packet should be deducted and given to HMRC.
It’s made up of several numbers and a letter.
Currently, 1257L is the code used for most people who have one job or pension.
But there are lots of different codes you can be given which all reflect your work or pension situation and how much money will be taken from you.
The numbers tell your employer or pension provider how much tax-free income you get in that tax year.
Most Brits have the above tax code because of the current personal allowance of £12,570, which is the income you’re not taxed on.
How do I find my tax code and how can I change it?
You can find your tax code in a number of different ways, including:
- on a “Tax Code Notice” letter from HMRC if you get one
- on your payslip (this might be online or in paper form)
- on the HMRC app
- by checking your tax code for the current year online on your personal tax account
HMRC should, normally, update your tax code when your income changes. They should receive this information from your employer.
But sometimes HMRC might not have the correct information and you may be given the wrong tax code.
Of course, HMRC won’t know if you have the wrong tax code so will continue deducting what it thinks is the correct amount from your pay.
So it’s up to you to be proactive and get in touch with them if you think it’s wrong.
As Martin said, you can use tools to check whether yours is incorrect, such as this one on the government’s website.
You can use the tool to update your employment details and tell HMRC about any change in income that might have affected your tax code.
If you have paid too much or too little tax, HMRC will send you either a tax calculation letter, also known as a P800, or a Simple Assessment letter.
If your P800 letter says you’re due a refund, it will tell you how to claim it.
You might be able to request the refund online, but you’ll need your Government Gateway user ID and password.
You can create one if you don’t have one, but you’ll need your National Insurance (NI) number and two of the following to hand:
- a valid UK passport
- a driving licence issued by the DVLA (or DVA in Northern Ireland)
- a payslip from the last three months or a P60 from your employer for the last tax year
- details of your tax credit claim
- details from your Self Assessment tax return (in the last two years)
- information held on your credit record if you have one (such as loans, credit cards or mortgages)
You’ll receive a Simple Assessment letter if you owe income tax that can’t be automatically taken out of your income, you owe HMRC £3,000 or more or you have to pay tax on the state pension.
If you think the calculation on the letter is wrong, you should call or write to HMRC within 60 days.
You can call on 0300 200 3300 or send a letter to Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.
If HMRC agrees your Simple Assessment was wrong, you’ll be sent the correct one.
If they disagree, you’ll get a letter explaining why, how to pay and how to appeal if you still think it’s wrong.
You can appeal, but you have to do it within 30 days of receiving your initial decision letter.
But you’ll need to specify which amounts you think are incorrect and what they should be.
Meanwhile, we explain how much National Insurance you pay.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
