If you pay tax through the PAYE (pay as you earn) system, you’ll get a tax code that tells you how much tax you’ll pay. So, how can you check your tax code and what should you do if you think there’s a problem?
When are tax codes sent out?
Tax codes are sent out over a six week period, starting in the first week of January and continuing until mid March. You will receive your P2 notice (tax code) first and a coding notice will then be sent to your employer.
If it’s not corrected, the wrong amount of tax could be taken from your wages after April 6th.
How to check your tax code
If you think your tax code could be wrong, get in touch with HM Revenue & Customs. If you prefer, you can ring them on 0300 200 3300 (sadly it’s not a freephone number so it will cost you).
Most tax codes are correct but in some cases they can be wrong. There are certain circumstances where you’re more likely to get a wrong tax code. These include:
– You have one job or private pension, but have received two (or more) coding notices.
– You have not received a notice of coding at all; HMRC has sent some notices of coding to old addresses, even though it has the correct details on file.
– You have received a coding notice that does not refer to a current job. If that’s the case, this coding may not be using up-to-date information.
– You are a basic rate taxpayer, but receive a notice of coding D0 (which is for 40% taxpayers).
– You have more than one job, but the tax-free pay allocated to one job is more than the expected income, which would waste some of your personal allowance.
– You are aged under 65 and haven’t received a notice of coding 1100L (or another letter). This means you haven’t been given the full personal allowance of £11,000 for the 2016-17 tax year. You should check that the benefits and/or extra tax reliefs are correctly reflected in the code.
SAVVY TIP: Not everyone who has a coding that isn’t 1100L followed by a letter has been sent the wrong code, but it’s definitely worth checking if you have a different coding. Make sure you can understand why you’re on a different code to the standard one.
– You receive the state pension, but HMRC has ignored it when calculating your tax code. Unlike most notices of coding, which don’t give people enough of their tax allowance, in this situation HMRC is being too generous.
SAVVY TIP: HMRC will realise its mistake at some point, and you could be landed with a large tax bill when it does. Make sure you contact HMRC if you think your coding isn’t taking your state pension into account.
SAVVY TIP: There’s more information about tax codes on the Gov.uk website.
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