TAXPAYERS are being urged by Martin Lewis to check that they’re on the right tax code.
If your code is wrong you may be paying thousands more than you need to and you’ll likely be owed money back.
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Your tax code determines how much income tax you pay on your earnings – so it’s important you’re on the right one.
Michele emailed MoneySavingExpert.com to say she’d been in the wrong tax code and was overpaying.
She featured in the site’s recent weekly email and said: “I checked my tax code and discovered I was being taxed on every penny I earned. “
I’d previously been self-employed, but my code hadn’t been updated with my employer.
“It took an hour on the phone to HM Revenue & Customs, but I’ve now been refunded £9,400.”
Michelle used MoneySavingExperts’ Tax Code Calculator to help work out whether her code was correct.
However, millions of UK workers miss out on these refunds because they don’t check to make sure theirs is correct.
The code is usually a mixture of letters and numbers – with the most common tax code being 1257L.
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We explain how to check if you’re on the right tax code to help you avoid losing out on hundreds of pounds or if you’re not paying enough tax.
What is a tax code?
A tax code is used by you your employer and pension provider to work out how much income tax you need to pay.
The tax owed it then automatically taken out of your pay packed.
You can earn £12,570 between April 2022 and April 2023 before paying tax. This is called your personal allowance.
Most people pay the basic-rate of income tax (20%) and the standard tax code for this is 1257L.
How do I check my tax code?
It’s worth checking if your employer is using the right tax code or you could end up paying the wrong amount. It’s especially important to do this if you’ve recently changed jobs.
You’ll usually get a letter in the post at the beginning of each financial year to notify you what your tax code is.
This year’s tax year started April 6 2022 and runs until April 5 2023.
But if you didn’t get a letter, or can’t find where it is, there are a number of ways you can check what your tax code is for the current tax year.
Your tax code will be displayed on your payslip, usually listed near your National Insurance number.
You can also use the government’s online tax checker tool to view your tax code.
How do I find out if my tax code is wrong?
You can check if your tax code is correct by using HMRC’s online tool or MoneySavingExpert’s free online tax calculator.
If it’s wrong, contact HMRC to let it know on 0300 200 3300. If it’s right, you don’t need to do anything.
HMRC will write to you or email you if they change your tax code – and they will also write to your employer about any changes too.
How do I know if I’m owed a tax refund?
If you are due a tax rebate HMRC will let you know by sending you a letter called a P800 or a simple assessment letter.
You will only get a P800 after the tax year has ended – and the letter will arrive between April and November.
P800 letters can also tell you that you haven’t paid enough tax, and you’ll have to repay it.
This letter will tell you if you can claim online through the government’s website.
If you claim online the money will be sent to your bank account within five days.
The government can also issue you a cheque in the post – but this’ll take longer.
How much could I get?
How much you could get back depends what tax code you were put on, your salary, and how much tax you should have been charged.
In some cases, you could be owed hundreds and in others like Michele’s case – thousands.
You can get help from organisations like Citizens Advice or TaxAid if you’re struggling to work out how much you could get back.
