'Check your pay slip' warns Martin Lewis of 'millions of euros in error'
MARTIN Lewis has warned that millions of workers could be owed cash and need to check their pay slips.
If your tax code is incorrect, you could end up paying thousands more than necessary and likely get a refund.
Speaking on this week's Martin Lewis BBC Radio 5 Live Podcast, the founder of MoneySavingExpert.com said: “You need to know your tax law and what it means, it is your legal responsibility.
“Millions are wrong. Millions pay too much. Millions pay too little.
“It's all a nightmare, so make sure you know what your tax code is and make sure it's correct.”
The code is usually a combination of letters and numbers, with the most common tax code being 1257L.
But these numbers and letters determine exactly how much income tax you pay on your income. So it is important that you are on the right track.
And if you notice that you are using the wrong tax code, you can reclaim the excess tax paid from the past four tax years.
But it is your responsibility to check this and let HMRC know if anything is wrong.
Here you can read exactly what each tax code means.
Plus, we've explained how to check and challenge your own tax code.
Why can I use the wrong tax code?
Tax codes on your payslip tell you how much you have to pay to HMRC each month.
You can use the wrong tax code for various reasons, such as if you change jobs or if your salary increases or decreases.
Sometimes HMRC may not have received this information and so will assume that your circumstances have not changed.
It's always worth checking your tax code to make sure you're paying the correct amount of tax if you've moved jobs or had a salary change.
What does my tax code mean?
TAX codes tell you how much you have to pay to HMRC each month.
Here's our guide to 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 allowance: you have transferred 10% 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 data 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 is 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 mean you have income that is not otherwise taxed and is worth more than your tax-free allowance
How do I check my tax code?
You can check your tax code online on your personal tax account, on your pay slips or in the HMRC app.
If you have one, you can also check this in a 'Tax Code Notice' letter from HMRC.
Please note that you may need your Government Gateway ID and password to log in.
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 something is wrong?
If, after checking, you think you are using the wrong tax code, you can contact HMRC to report this by telephone on 0300 200 3300.
This is usually the fastest way to get an answer.
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 use the wrong tax code and have overpaid, HMRC will change this so that you pay the correct amount from now on.
They must also refund the tax you have already paid in excess.
It's always worth noting: you may be contacting HMRC about an incorrect tax code and you may have been underpaid.
In this case, you usually have to repay the money over a period of twelve months.
But only if you earn enough income above the personal allowance, which currently stands at £12,570, and owe less than £3,000 back.
HMRC may contact you to let you know that you are also entitled to a tax credit. They do this via a P800 letter or a simple assessment letter by post.
But again, 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.
To file a claim online, you will need your Government Gateway ID and password.
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 via a 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.