Are you on the right tax code for 2019/20? You could be owed HUNDREDS of pounds

EARNERS with the wrong code on their payslip could be overpaying hundreds of pounds to the taxman every year.

But get the right code and you could see the extra cash refunded into your bank account.

Tax codes apply to everyone who's employed full-time or part-time, or receiving a private pension, yet millions of us don't even bother to check if ours is correct.

In most cases, HMRC will issue you a code but mistakes happen, especially if you've moved jobs or started receiving benefits for the first time over the past year.

We've put together a guide on tax codes so you can check to see if yours is correct, how to get it changed if it's wrong and how to get a rebate.

What is a tax code and what does it look like?

A tax code is usually made up of a combination of numbers and letters and is used by employers and pension providers to work out how much income tax you should pay.

Employers take the sum of money from your paycheck before if arrives in your account.

Most of us who are basic-rate taxpayers (because we earn less than £37,500 a year) can earn £12,500 between April 2019 and April 2020 before paying tax. This is called your personal allowance.

This allowance figure, divided by 10, makes up the first four numbers of your code which is then followed by a letter.

The most common code this year is 1250L which indicates your personal allowance.

Earners in Scotland will see an S at the start of their code to show that they're paying the Scottish rates of income tax.

If you claim benefits or still owe tax from last year

If you see a K at the end of your code then you're receiving income that hasn't been taxed yet, such as state benefits, or you still owe tax from last year or you get employee benefits from work.

This income reduces your personal allowance so you'll need to pay tax on a bigger portion of your income.

For example, if you have a company car that is paid for by the employer and you're allowed to use if for personal use too.

HMRC will come up with a figure that it feels reflects the amount of income you're getting from the car, say £5,000 for example.

It will then be taken away from your personal allowance, so your new tax code will read 750LK.

Certain state benefits also require that you pay income tax on them too. These are:

• State Pension
• Jobseeker’s Allowance (JSA)
• Carer’s Allowance
• Contribution-based Employment and Support Allowance (ESA)
• Incapacity Benefit (from the 29th week you get it)
• Bereavement Allowance
• Pensions paid by the Industrial Death Benefit scheme
• Widowed Parent’s Allowance
• Widow’s pension.

If you've applied the Marriage Allowance

The Marriage Allowance gives couples a tax break worth £250 by transferring a portion of one person's personal allowance to your partner.

To be eligible, you need to be married or in a civil partnership and one of you needs to be a non-taxpayer while the other is a basic tax payer.

You'll see an M on your tax code if you receive 10 per cent of your partners personal allowance, or an N if you've transferred a portion to your other half.

You earn more than £100,000 a year

Things get more complicated for higher earners, who pay either 40 per cent or 45 per cent income tax.

Those bringing home more than £100,000 a year will see their personal allowance reduced by £1 for every £2 they earn above the threshold.

Their tax code will begin with a T followed by a figure that reflects how much personal allowance you have left after the deductions.

Those who earn more than £123,000 will have a tax code that starts with 0T which indicates that you are not entitled to any personal allowance and will be taxed on all of your wages.

You have more than one job or receive a private pension

You'll receive a difference tax code for each source of income you have, such as a second job or if you claim a private pension.

You'll need to tell HMRC which one is your main source of income to make sure you receive your entire personal allowance on this payslip.

You have to pay the basic rate of tax - 20 per cent - on the entire wages you earn from any other job. This is indicated by a BR on your payslip.

Often, this code is applied to the wrong slip and it could be costing you hundreds of pounds a year.

If your second jobs pushes you over the £100,000 mark then you'll see a D0 code on one of your slips, meaning you'll be taxed at the higher rate from that employer.

D1 is applied to those earning over £150,000 across more than one job because they are charged the additional tax rate.

You earn less than £12,500 a year

You won't have to pay income tax if your annual wages are lower than your personal allowance, which is indicated by the NT in your tax code.

You may also see NT if you're a self-employed contractor who is required to pay national insurance but not income tax.

If you think you've been emergency taxed

If HMRC doesn't have enough information about you to send your employer the correct code, then you're given an emergency tax code which doesn't take into account any reliefs you may be entitled to.

If that's the case, you'll see either W1, if you're paid weekly, or M1, if you're paid monthly, at the end of your tax code.

This is really common if you've changed jobs partway through the year and haven't handed over a P45 to your new employer yet.

When you start a new job, it will automatically assume that it's the start of the tax year and spread your personal allowance over 12 months, instead of over how many months there are left in the tax year.

For example, if you started your new job in November, then you should receive a seventh of your personal allowance but instead you may only be receiving a twelfth which could see you overpaying.

You may also be put on an emergency tax code f you're getting company benefits or the State Pension.

Your employer should change your tax code as soon as you give them your P45 or P46 and reimburse you as soon as possible.

If you get to the end of the financial year and still haven't been refunded the difference you should get it back in a rebate.