Taxpayers have been urged to check over their details as many people have the wrong information on their records. Consumer site Money Saving Expert (MSE) has warned that millions of people need to update their details with HMRC.
In a message on social media, the group said: “A new tax year means it’s a good time to check your tax code. If it’s wrong, you could be due £1,000s back.” The post warned that “millions are wrong each year” and reminded taxpayers that it is their individual responsibility to check that their tax code is correct.
This means if you are employed, it’s down to you to check your code is right, not your employer. The MSE team shared a success story from someone who had recouped a large chunk of cash after being on the wrong tax code for years.
£9,400 refund from HMRC
The taxpayer, named Michele, said: “I was being taxed on every penny I earned, without any allowance. I’d previously been self-employed, but stopped trading three years ago and my tax code hadn’t been updated with my employer.
“It took an hour on the phone to HMRC, but I’ve now been refunded £9,400.” Your tax code determines how much tax is deducted by your employer or by your pension provider on your income.
You can find yours on a recent payslip or on a Tax Code Notice letter, if HMRC sends you one of these. Each person gets a standard tax-free allowance meaning they can earn up to £12,570 a year without paying income tax on these earnings.
You could overpay thousands
But if you are on the wrong tax code, there is a risk this allowance may not be properly applied to you. If you missed out on the allowance and are a basic rate taxpayer, you could needlessly pay an extra £2,514 a year in tax.
If you were wrongly tax in this way across three tax years, you could wrongly pay an extra £7,542 to HMRC. The tax department said previously: “Anyone who thinks their tax code is incorrect can update their details on our app or via their online tax account, or contact our helpline if unable to go online.” The number to call is 0300 200 3300.
The most common tax code is 1257L, indicating that you are entitled to the full £12,570 personal allowance. If HMRC finds out that you have paid too much tax, you will be sent a P800 tax calculation letter.