Analysts are urging taxpayers as a “costly mistake” from HM Revenue and Customs (HMRC) could result in workers’ salaries being slashed.
Adam Bennett, a workplace expert at Digital ID, is urging Britons to check their tax code as soon as possible.
This comes after reports of employees making accidental tax overpayments on their salary through no fault of their own.
Bennett said: “If your tax code results in too much tax being deducted, you might receive a smaller paycheck and could struggle financially until you reclaim the excess tax.
“A wrong tax code could [also] mean you’re underpaying tax, leading to a surprise bill from HMRC later, possibly with interest and penalties.
“Incorrect deductions reduce your disposable income, impacting your ability to manage expenses or save.”
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Taxpayers are being urged to check what code they are on
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What is a tax code?
This is a combination of letters and numbers that represents the amount of tax-free income someone is entitled to in a tax year.
The most common tax code for the 2023-24 financial year is “1257L” which means a taxpayer has a Personal Allowance of £12,570.
This sum is amount someone can make tax-free from their income without having to pay any tax. Other tax codes include:
- BR – indicates that all income is taxed at the basic rate at 20 per cent
- D0 – indicates all income is taxed at the higher rate at 40 per cent.
- 0T – indicates no tax-free personal allowance applies.
How to check your tax code?
There are multiple ways people can find out whether they are overpaying or underpaying income tax.
These include:
- Reviewing payslips
- Checking P45/P60 forms
- Using the Government’s online portal.
Experts urge Britons to contact HMRC directly if they have any concerns about the level of tax being paid.
The tax authority will be able investigate and make any necessary adjustments if a discrepancy is found.
Bennett added: “Keeping an eye on your tax code and understanding its implications is essential for managing your finances effectively.
“Mistakes can happen, but by staying proactive and informed, you can catch errors early, avoid unexpected bills, and ensure you’re not paying more than you should.”
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Households are paying more tax due to accidentally making overpayments
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What to do if a tax code is Wrong
After finding out if tax overpayments or underpayments have been made, anyone affected should take action urgently.
There are multiple tasks someone should do to ensure they get any money that is owed to them, including:
- Correcting personal or financial information with HMRC
- Claiming a refund if too much money has been paid
- Arrange a repayment schedule if money is owed to the Government.
More information can be found by visiting the Government’s website.
Emily Foster is a globe-trotting journalist based in the UK. Her articles offer readers a global perspective on international events, exploring complex geopolitical issues and providing a nuanced view of the world’s most pressing challenges.
