TAXING TIMES
How a simple tax check could save you £1,000s and it only takes minutes to do
Watch our video to find to find out how you tax code can reveal if you're owed a payout
MILLIONS of workers could save thousands of pounds by making a simple tax check ahead of April.
Anyone employed or paid via PAYE is given a tax code by their employer via HMRC and it is shown on your payslip.
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This code dictates how much income tax you pay on your earnings - so it's important to check if you're on the right one.
Being on the wrong tax code could leave you hundreds, if not thousands of pounds out of pocket.
While it is relatively straightforward to request a refund, it's far more convenient to ensure you're on the correct tax code in the first place, saving you the hassle of going through the claims process.
A Freedom of Information (FOI) request submitted by The Sun last month revealed that HMRC refunded a staggering £8.3billion in overpaid tax during the 2022/23 financial year.
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On average, each worker received £943.
People are often put on the wrong tax codes if they change jobs.
At the end of each tax year, HMRC usually sends a letter out to tell people if they have overpaid or underpaid tax - these are known as P800 letters.
However, even those who take the initiative to check their tax code before these letters are sent may face delays in resolving issues, as HMRC often experiences high demand during this period.
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Therefore, ensuring your tax code is corrected well in advance of April could save you both time and money.
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How do I check my tax code?
You can check your tax code on your online personal tax account, via payslips, or on the HMRC app.
You can also, if you've received one, check your code on a "Tax Code Notice" letter from HMRC.
You'll need your Government Gateway ID and password to log in to your online personal tax account.
If you don't have this you can use your National Insurance number or postcode and two of the following:
- A valid UK passport
- A UK photocard 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 a tax credit claim if you have made one
- Details from a Self Assessment tax return (in the last two years) if you made one
- Information held on your credit record if you have one (such as loans, credit cards or mortgages)
What does my tax code mean?
YOUR tax code is a combination of letters and numbers.
The number will normally dictate the level of your tax-free allowance. So if your allowance is £11,000 the first four digits of your code will be 1100.
The letters have different meanings - here is a guide:
- L - You're entitled to the standard tax-free personal allowance
- M - Marriage Allowance: you've received a transfer of 10 per cent of your partner's personal allowance (£1,260)
- N - Marriage Allowance: you've transferred 10 per cent of your personal allowance to your partner
- S - Your income or pension is taxed using the rates in Scotland
- T - Your tax code includes other calculations to work out your personal allowance, for example, it's been reduced because your estimated annual income is more than £100,000
- 0T - Your personal allowance (which is currently £12,570) has been used up, or you've started a new job and your employer doesn’t have the details they need to give you a tax code
- BR - All your income from this job or pension is taxed at the basic rate (usually used if you've got more than one job or pension)
- D0 - All your income from this job or pension is taxed at the higher rate (usually used if you've got more than one job or pension)
- D1 - All your income from this job or pension is taxed at the additional rate (usually used if you've got more than one job or pension)
- NT - You're not paying any tax on this income
- Tax codes starting with K mean you have income that isn’t being taxed another way and it's worth more than your tax-free allowance
If your tax code begins with 'W1', 'M1' or 'X' you've been placed on an emergency tax code and may need to update your details.
Why I am in the wrong tax code?
There are several reasons why you might be on the wrong tax code, including if you've started a new job and HMRC has not received your income details in time.
You might also be on the wrong code if you've started working for an employer after being self-employed, or you're working more than one job at a time.
If you are on the wrong code, the tax office will often put you on an emergency tax code until you contact them about changing it.
Bear in mind, in some cases you might have been put on the wrong tax code and be underpaying and owe HMRC money.
In any case, you'll want to correct it when you can so you're paying the right amount going forward.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "It’s a relatively straightforward process and this money is rightfully yours, so don’t hang about – make a claim as soon as you can."
How to report a wrong tax code
If, after checking, you think you're on the wrong tax code, you can contact HMRC to tell them via phone on 0300 200 3300.
This is usually the quickest way to get a response.
Or, you can send a letter to the following address: Pay as You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.
If you are on the wrong tax code and have been paying too much, HMRC will change it so you pay the correct amount moving forwards.
They should also reimburse any tax you've already overpaid.
If you've been underpaying tax, you will usually have to pay the money back over 12 months.
But, only if you are earning enough over the personal tax allowance (£12,570) to cover the underpayment and owe less than £3,000.
HMRC might get in touch with you to tell you you're owed a tax rebate too - they'll do this via a P800 letter or a simple assessment letter in the post.
But again, a P800 might tell you if you've not paid enough tax and have to pay it back.
A P800 letter will tell you if you can claim online through the Government's website, in which case you'll need your Government Gateway ID and password.
If you claim the money online it will be sent to your bank account within five days.
You can also claim your refund through the HMRC app.
If your P800 letter states you will be paid your tax rebate via cheque in the post, you should receive it within 14 days of the date on your letter.
If you're owed tax from more than one year, you'll get a single cheque for the entire amount.
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There are time limits in place to reclaim any overpaid tax, which is currently four years from the end of the tax year in which you are trying to claim.
So, if you're in any doubt you've overpaid tax, you should contact HMRC as early as possible.
How do I file a tax return?
TO file a self assessment tax retun, you'll need to register with HMRC first, which will then issue you with a Unique Taxpayer Reference (UTR).
You must register for self assessment by October 5 if you have to file a tax return and you have not sent one before.
You can do so by visiting www.gov.uk/register-for-self-assessment.
If you've previously registered and already have a UTR, you don't need to go through this step again.
Once you've got your UTR, you can sign in via the "Self Assessment tax return" section of HMRC's website by visiting www.gov.uk/log-in-file-self-assessment-tax-return.
You can then file your self assessment tax return online.
The deadline for sending a return online is January 31 every year.
If you need a paper copy of the main Self Assessment tax return, call HMRC on 03000 200 3610 and request an SA100 form.
The deadline for sending a return using a paper form is October 31 every year.
You need to pay the tax you owe by midnight on January 31 each year.
HMRC accepts your payment on the date you make it, not the date it reaches its account.
File late and HMRC will issue you with a fine.
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