Every UK worker told to check for code ‘worth £689’ on payslip | Personal Finance | Finance
HMRC has begun sending cheques and tax repayment letters to households following the end of the previous tax year.
Millions of people are currently on the wrong tax code, including many regular PAYE employees. It means that you could be paying too much tax on your earnings, or too little.
Both are bad because if you’re underpaying, HMRC will eventually realise, and you could end up with a sudden hefty tax bill that you legally must pay. Overpayment means you’re giving up salary that you don’t need, and it can take months for it to be spotted by the taxman.
According to research by Canada Life, the average overpayment of tax is £689 in the UK, so if you did overpay, you could be owed as much as that back, or more.
For most people, your tax code will be 1257L – this is the standard tax code for most basic rate taxpayers earning over £12,570 and you should be able to find this on your weekly or monthly payslip.
If your tax code has ‘W1’ or ‘M1’ or ‘X’ at the end – these are emergency tax codes. For example, 1257LWI, 1257LMI, or 1257LX all complicate things, usually because of job changes or HMRC not being given the correct details.
If your change in circumstances means you have not paid the right amount of tax, you’ll stay on the emergency tax code until you’ve paid the correct tax for the year and you could be owed money – or you could owe HMRC money.
BR means all your income is taxed at the basic rate – usually this is for a second job. But D0 means all of the income is taxed at a higher rate. D1 means all your income is at the additional rate (the topmost), and NT means you aren’t paying any tax on the income at all.
Speaking on an episode of The Martin Lewis Podcast in January, the money expert said: “Do you know what your tax code is? If you’re an employee you need to, because millions of them are wrong each year and if they are wrong, legally it’s your responsibility not your employer’s and not HMRC’s, to ensure it’s correct.”
He added: “It could mean you’re paying far too much tax each year. You don’t want that. It could also mean, you’re paying too little tax. Sounds good? It isn’t, because at some point they WILL catch up and make sure you pay the tax that you owe.
“So you could be hit, slapped across the face, with a big tax bill and not have the cash to pay it, which is a nightmare.
“So, each year when you get your tax code you should check it, and if you’ve never checked it before, it’s worth going and finding it now and doing a check.”
