The exact code on the pay stub that indicates whether you are owed cash: this could be HUNDREDS
TAXPAYERS should look out for a code on their pay slips to check if they are owed hundreds of pounds in cash.
If you use the wrong tax code, you could end up paying more than necessary and potentially get a refund.
The tax code on your payslip tells you how much you have to pay to HMRC each month.
If you don't check your details, you may have used the wrong code and not realize that you are paying too much tax.
The same can also happen in reverse, meaning you may pay too little and have to pay back taxes.
That's why it's important to be vigilant when it comes to keeping an eye on your tax laws, as it's your responsibility to let HMRC know if something is wrong.
It is easy to recognize and usually consists of a combination of letters and numbers. The most common tax code is 1257L.
The combination of letters and numbers tells you exactly how much income tax you pay on your earnings, so you should be on the right track.
If you notice that your tax code is incorrect, you can reclaim the excess tax paid from the past four tax years.
Here we explain how to check your tax code and what to do if you think your tax code is incorrect.
What are the different tax codes and what do they mean?
As we mentioned earlier, your tax code consists of different letters and numbers. Here's what each of the letters means:
- L – You are entitled to the standard tax-free personal allowance
- M – Marriage Allowance: You have received a transfer of 10% of your partner's personal allowance (£1,260)
- N – Marriage benefit: you have transferred 10 percent of your personal deduction to your partner
- S – Your income or pension is taxed at the rates in Scotland
- T – Your tax code contains other calculations to calculate your personal deduction. For example, this has been reduced because your estimated annual income is more than € 100,000.
- 0T – Your personal allowance (currently €12,570) has been used up, or you have started a new job and your employer does not have the information they need to give you a tax code
- BR – All your income from this job or pension will be taxed at the basic rate (usually used if you have more than one job or pension)
- D0 – All your income from this job or pension will be taxed at the higher rate (usually used if you have more than one job or pension)
- D1 – All your income from this job or pension will be taxed at the additional rate (usually used if you have more than one job or pension)
- NT – You do not pay tax on this income
- Tax codes starting with K means that you have income that is not taxed in any other way and that is worth more than your tax-free allowance
If you change jobs, it's worth checking your details and making sure you're using the correct code.
It may be that HMRC has not received any information about your changed circumstances and therefore will not update anything.
How can I check whether I am using the correct tax code?
You can check your tax code online on your personal tax account, on a payslip or via the HMRC app.
If you have received one, you can also check this against a 'Tax Code Notice' letter from HMRC.
To log in and check your tax code, you will need your Government Gateway ID and password.
But if you don't have this, you can use your social security number or zip code and two of the following:
- A valid British passport
- A UK driving license with photo card issued by the DVLA (or DVA in Northern Ireland)
- A pay slip from the past three months or a P60 from your employer from the past tax year
- Details of a tax credit claim if you have submitted one
- Information from a self-declared tax return (from the past two years), if you have filed one
- Information about your credit details if you have any (such as loans, credit cards or mortgages)
What should I do if my code is wrong?
If you think your tax code is incorrect, you should contact HMRC to tell them.
You can contact them by calling 0300 200 3300, but you can also send them a letter.
If you are sending a letter, please address it to Pay as You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.
If you use the wrong tax code and have overpaid, HMRC will change this so you pay the correct amount in the future.
You must also receive a refund of any overpayments.
If it turns out that you have paid too little and owe HMRC, you will usually have to repay the money within twelve months.
However, this only applies if you earn enough income above the Personal Allowance, which is currently £12,570, and owe less than £3,000 back.
What should I do if I forget to check my tax code?
HMRC may also contact you to let you know that you are entitled to tax relief. They do this via a P800 letter or a simple assessment letter by post.
But as before, a P800 can tell you if you haven't paid enough tax and need to pay it back.
A P800 letter will tell you whether you can submit a claim online via the government website.
If you claim online, the money will be sent to your bank account within five days.
You can also claim your refund via the HMRC app.
If your P800 letter states that you will receive your tax credit by check in the post, you will receive it within 14 days of the date on your letter.
If you owe taxes for more than one year, you will receive one check for the entire amount.
Meanwhile, the taxman is accused of trying to make money from struggling Britons who cannot pay their tax bills on time.
We also have eight tips for completing your tax return yourself and avoiding a €100 fine.