YOU could be due a tax refund worth hundreds of pounds – and there’s a quick way to check if you’re owed cash.
Millions of people could be receiving less than they should in their payslips because they’re on the wrong tax code.
If you’re employed or paid via PAYE, or if you receive a private pension, you will be given a tax code by your employer via HMRC.
This will appear on your payslip and will dictate how much income tax you pay on your earnings.
Your tax code is a short string of letters and numbers, for example 1257L.
An estimated 31% of adults have been on the wrong tax code at some point, according to research by Canada Life.
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It means you could be paying more tax on your income than you need to.
The average overpayment is worth a huge £689 – so it’s well worth getting refunded.
However, just be aware you could have the opposite problem and may not be paying enough tax.
In that case, it’s still worth making sure you’re put onto the right tax code so you’re not landed with an unexpected big bill down the line.
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You might be on the wrong tax code for several reasons, for example if you have started a new job and HMRC has not received your income details in time.
You might also be on the wrong code if you’ve started working for an employer after being self-employed, or you’re working more than one job at a time.
Some workers are put onto emergency tax codes in these cases.
Emergency tax codes mean the tax is calculated just on that week’s or month’s pay in isolation, so your £12,750 personal allowance for the year isn’t taken into account.
So if you stopped working after a few weeks or months, you may have earned well below the threshold but still been taxed.
How do I report a wrong tax code?
You can check your tax code on your online personal tax account, via payslips, or on the HMRC app.
You may have also received a “Tax Code Notice” letter from HMRC.
If you’re logging on to your personal tax account online, you’ll need your Government Gateway ID and password.
If the tax code ends in W1, M1 or X then you’re on an emergency tax code.
If you think you’re on the wrong tax code, you should contact HMRC.
The quickest way to get in touch is to phone them on 0300 200 3300.
Alternatively you could send them a letter to the following address: Pay as You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.
If you are on the wrong tax code and have paid too much, HMRC should reimburse you and move you onto the right one.
If you’ve been underpaying, you’ll usually have to pay the money back over 12 months.
But that’s only if you are earning enough over the personal tax allowance (£12,570) to cover the underpayment and owe less than £3,000.
HMRC might also get in touch with you first to tell you you’re owed a tax rebate.
You should get a letter in the post in this case.
If HMRC sends you a P800 tax calculation refund telling you that you’re due a refund, you might get a cheque in the post.
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Sometimes you might need to claim online instead, but the letter will include instructions telling you how to do this.
If you’re still working and overpaid tax through PAYE, you might instead be refunded through your payslip over the next few months.