The code on your payslip that could mean you’ve overpaid hundreds of pounds in tax
CHECKING a five-digit code could signal that you’ve overpaid hundreds of pounds in tax and are due are rebate.
Tax codes dictate how much is deducted from your pay, and if you’ve been placed on the wrong one you could be paying the incorrect amount.
The codes can be found on your payslip and it’s important to make sure you’ve been placed in the right band.
If your payslip shows the code for the wrong band and you have overpaid tax you can apply for the money to be paid back.
But, the wrong code could also mean you’ve paid too little in tax and could end up owing money to HMRC.
It’s particularly important to be vigilant when it comes to your tax code as it’s your responsibility to let HMRC know if it’s wrong.
Your tax code denotes the tax-free personal allowance you’re entitled to, so the wrong code could mean you’re being taxed on earnings you shouldn’t be.
It’s easy to find your tax code on your payslip. It is normally a five-digit mixture of letters and numbers.
The most common tax code is 1257L, which signifies that you’re entitled to the standard tax-free allowance of £12,570.
Factors that could mean you’re not entitled to the standard allowance include receiving employee benefits such as medical insurance, having second jobs or pensions or using schemes such as the marriage allowance.
If you think you’re tax code is wrong you can claim back tax you’ve overpaid in the past four years.
Here’s how to check your tax code and what to do if it’s wrong.
How do I check my tax code?
You can find your tax code either on your payslip or by logging into your personal tax account online or via the HMRC app.
You may also have been sent a ‘tax code notice’ in the post by HMRC.
To log in online or to the app and check your tax code you will need your Government Gateway ID and password.
If you don’t have these you can use your National Insurance number or postcode and any two of the following:
- A valid UK passport
- A UK photocard driving licence issued by the DVLA (or DVA in Northern Ireland)
- A payslip from the last three months or a P60 from your employer for the last tax year
- Details of a tax credit claim if you have made one
- Details from a self assessment tax return (in the last two years) if you made one
- Information held on your credit record if you have one (such as loans, credit cards or mortgages)
What does my tax code mean?
Your tax code is a combination of letters and numbers.
The number will normally dictate the level of your tax-free allowance. So if your allowance is £11,000 the first four digits of your code will be 1100.
The letters have different meanings – here is a guide:
- L – You’re entitled to the standard tax-free personal allowance
- M – Marriage Allowance: you’ve received a transfer of 10 per cent of your partner’s personal allowance (£1,260)
- N – Marriage Allowance: you’ve transferred 10 per cent of your personal allowance to your partner
- S – Your income or pension is taxed using the rates in Scotland
- T – Your tax code includes other calculations to work out your personal allowance, for example, it’s been reduced because your estimated annual income is more than £100,000
- 0T – Your personal allowance (which is currently £12,570) has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code
- BR – All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
- D0 – All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
- D1 – All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)
- NT – You’re not paying any tax on this income
- Tax codes starting with K mean you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance
If your tax code begins with ‘W1’, ‘M1’ or ‘X’ you’ve been placed on an emergency tax code and may need to update your details.
If you change jobs, take on an additional role or have another change in circumstances it is also worth checking your details and making sure you are on the correct code.
It could be that HMRC has not received information about your change of circumstances and therefore will not update anything.
What if my code is wrong?
If you think your tax code is wrong you will need to contact HMRC to tell them.
You can contact them by phoning 0300 200 3300, or sending a letter.
If you are sending a letter address it to, 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 been paying too much, HMRC will change your code so you are paying the correct amount in the future.
You should also get reimbursed for any overpayments you have made.
If it is found that you have underpaid, and owe HMRC, you will usually have to pay the money back over 12 months.
But, this will only be the case if you earn enough income over your personal allowance to cover the underpayment and owe less than £3,000.
What if I don’t check my tax code?
HMRC could also get in touch with you to let you know you’re owed a tax rebate and they will do this via a P800 letter or a simple assessment letter in the post.
But as before, a P800 might tell you if you’ve not paid enough tax and have to pay it back.
A P800 letter will tell you if you can claim online through the government’s website.
If you claim online the money will be sent to your bank account within five days.
You can also claim your refund through the HMRC app.
If your P800 letter tells you you will be paid your tax rebate via cheque in the post, you should receive it within 14 days of the date on your letter.
If you’re owed tax from more than one year, you’ll get a single cheque for the entire amount.
Tax experts have also urged people to remember that their side hustles could be taxable and may need to be taken into account.
Research has also warned workers to expect their tax rates to increase, with one in five taxpayers expected to be dragged into the 40% rate by 2027.
Who needs to fill out a self-assessment tax return?
YOU'LL need to submit a tax return if any of the following applied to you in the 2022/2023 tax year:
- You were self-employed and your income was more than £1,000
- You had multiple sources of income over £1,000
- You earned £10,000 or more before tax from savings, investments, shares or dividends
- You claimed Child Benefit when you or your partner earned more than £50,000 a year.
- You earned more than £2,500 from renting out property, or from other untaxed income, such as tips or commission
- You earned more than £100,000 in taxable income
- You earned income from abroad or lived abroad and had a UK income
- You need to pay capital gains tax
- You received income from a trust
- Your state pension was more than your personal allowance and was your only source of income (unless you started getting your pension on or after 6 April 2016)
- HMRC has told you that you didn’t pay enough tax last year (and you haven’t already paid up through your tax code or via voluntary payments)
- You filed a self-assessment tax return for the 2021/22 tax year (even if you didn’t owe any tax)
- You were self-employed and earning less than £1,000 but you still want to pay ‘class 2’ national insurance contributions voluntarily to protect your entitlement to the state pension and certain benefits
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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