Have you ever wondered if you might not be paying the right amount of tax? HM Revenue and Customs (HMRC) deals with millions of income and tax matters everyday so it could be possible that you maybe paying the incorrect tax amounts. Reason you maybe paying the wrong amount of tax is due to the tax code.
Who has a tax code?
Anybody who is employed, no matter part-time or full-time, and who is with a private pension, will have its own tax code. For those who have multiple jobs will have more than one tax code.
If you are unemployed, self employed or getting a State Pension then you will not have a tax code.
Where to check if you get the right tax code
Beforehand, you should know about the personal allowance. Everyone is entitled a personal allowance to reduce taxable income. The standard personal allowance is £12,570 in the 2020/21 tax year. This is how much you earn before paying income tax.
After understanding the personal allowance, you need to know each tax code.
Common tax codes are:
L: Receive a full personal allowance.
BR: All income from this job or pension is subject to income tax at the basic rate of 20%. It applies to people with more than one income.
D0: The higher rate of 40%.
NT: No need to pay tax.
0T: You will be taxed on all of the income, as you reach the high earning bracket.
Reason you get the wrong tax code:
If you have more than one source of income, the tax code will become more complex and more likely to be incorrect.
- Start a new job: Usually you will have a temporary emergency tax code, however, there’s not enough information showing how much you’ve earned and tax you’ve paid, this may cause an incorrect tax pay amount.
- Receive an income with additional job or pension: If your first job uses up your personal allowance, it could result in changing your tax code.
- Change of income: A rise or fall in income can lead to change of tax code.
- Start or stop benefits from job: This could affect how much money you receive in payslip, and change the tax you need to pay.
- Start or stop taxable state benefits, including the state pension, widow’s pension, widowed parent’s allowance, bereavement allowance, incapacity benefit, employment and support allowance and carer’s allowance.
How to change my tax code?
If you think your tax code is wrong, you can fill an online form, or call 0300 200 3300.
Also, if you expect a tax refund, just contact us on 01902 939 391 and we will do the rest for you.
