Martin Lewis explains ‘complex’ tax codes
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Getting the incorrect tax code is a simple error that can easily be solved by contacting HMRC online or through, 0300 200 3300. Britons have been urged to check their codes are correct and save themselves the financial heartache that these five Redditors experienced.
Perrys Chartered Accountants shared that the average British household is currently paying £1.1million in taxes during their lifetime.
This eye-watering amount could be increased even further if Britons are not aware that they are on the wrong tax code.
Having the wrong tax code could result in blatant overpaying that they may not be able to get back or underpaying which they will then be charged for.
Perrys Chartered Accountants urged Britons to check their tax codes, noting: “Those few digits can make quite a difference to the amount of tax you’re paying, and it’s not uncommon for errors to creep in. If in doubt about your tax code, speak to your employer or call HMRC directly.”
r/UKPersonalFinance is a Reddit forum where people can take their financial concerns, issues and ideas, receiving advice and input from their fellow Redditors.
One user, throw_back_come_back would have been charged roughly £400,000 for their end of year tax bill, all due to a simple mix up.
They shared on the forum: “I’ve just started a new job, and received notification from HMRC that I have a new tax code. I logged on to my account to check, and it seems my employer have submitted my estimated take home this year at something like £900,000.”
They noted that this was entirely incorrect, although they were yet to receive their first paycheque which would reveal the impact of this error.
Another Reddit User, 8thDragonball, had a particularly worrying question for the forum, as they had been on the wrong tax code for years.
They said: “I’ve been on the wrong tax code for 5 years now. I used to live in Scotland and so I always had an S at the start of my tax but when I moved to England the S did not change. Only just realised.
“After a call with HMRC they managed to make a change request and the S will be dropped at the end of April.”
Scottish tax rates are marginally higher than England’s but with different thresholds as well which meant 8thDragonball had been vastly overpaying tax for half a decade.
User Affectionate_Pie333 shared on r/UKPersonalFinance a dilemma they were having despite highlighting to their employer that their tax code was wrong.
They said: “I changed jobs and was assigned an emergency tax code instead of my usual tax code. And they have taken 400 pounds more income tax than what HMRC take home pay calculator tells me.
They queried: “I am still waiting for the P45 from my previous employer. What should I do to make sure my next month pay they use the correct pay code? Can I claim the 400 pounds extra taken back?”
The answers from the comment section were varied, with some saying HMRC would rectify it themselves while others said as the new tax year had started nothing would be done until the start of April 2023.
Unfortunately, it is not always possible to get back what a person has overpaid in tax, as user Scoggy learnt the hard way.
They said: “I have simple PAYE tax affairs, and feel very stupid for not paying attention to my tax code. I changed job in December 2009. In my old job I had private medical insurance, and don’t in my current job.
“This month I found out by chance that my tax code has included £918 medical insurance for each year since 09/10. I was gutted as it means I’ve overpaid tax for 12 years.”
Scoggy was able to receive a £1,800 refund, backdating to the 2015 to 2016 tax year, but the HMRC representative he spoke to noted they could not go back any further.
They concluded: “Moral which I think everyone but me already knew: check your tax code!”
Source: Read Full Article