Tax code check is worthwhile

Although many individuals assume that their tax code is correct, it is worth taking the time to make a few basic checks, since mistakes can occur.  By taking a few minutes to check your code, you may be able to identify problems early on and prevent paying more than you owe.  

 Here are some basic checks you can make;

Identify your tax code  If you have lost your PAYE coding notice, you can find your code in other ways. If you're unemployed it will be on your P45. If you have lost this, then give HMRC your National Insurance number and tax reference number and they should be able to tell you. Alternatively, if you use the Government's online system to file your tax return you can find your PAYE code on there.

Don't assume that HMRC has the correct code  It is tempting to assume that your tax code is accurate. However, HMRC does not wait until you have filed your tax return for the January 31st deadline before sending out your code in February, so they do not have the most recent information. It is up to you to point out any errors they may have made.

Check the basic details  Make sure that your name, address and National Insurance number on the coding notice are correct.  If not, then the tax code may also be wrong.  The notice will also state: "You need a tax code so (your employer's name) can work out how much tax to take off." If you no longer work for that employer, contact them immediately since they obviously do not have the most up to date information on your circumstances.

Look at the letters on the code  Check the letter at the front of your tax code. L is for anyone getting the basic personal allowance. P is for those aged between 65 and 74 getting the full personal allowance. Y is for those 75 or over getting the full personal allowance. V is for those aged between 65 and 74, eligible for the full personal allowance and the married couple's allowance who just pay basic rate tax. K means you get no tax-free pay or owe money to HMRC. T means HMRC needs further information so cannot allocate another code. BR means that you are taxed at the basic rate. DO means you are taxed at the higher rate without allowances (usually used for a second job or a pension). NT means that no tax is to be taken from your income or pension.

What the numbers mean  The numbers on your tax code are worked out as follows. Firstly your tax allowances, then income you have not paid tax on – part-time earnings or untaxed interest – and any taxable employment benefits are added up. This figure is then taken away from the tax allowance and divided by 10. This is added to the relevant letter and becomes your tax code.

If you do think you are on the wrong tax code, contact the HMRC Taxes Helpline on 0845 300 0627. 

Further information on UK tax codes can be found on the HMRC website

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