On The Martin Lewis Money Show yesterday, the finance expert discussed the end of the tax year, and what Britons can do to try and save some extra cash. Darren emailed into the show thanking the money saving expert for the “tax code tip” that helped him save £475.
He said: “I just received a cheque for £475 and they have now changed my tax code so I can get an extra £1,200 tax allowance a year.”
There are millions of people who are on the wrong tax code and overpay each year because they fail to check.
He urged Britons to check their tax codes.
The money saving expert said: “[Your tax code] is the little code that tells your employer or your pension firm how much tax to take off you.
“Currently it will be a number like 1257L – that’s the standard one.
“Millions of these are wrong every year and it’s not your employers responsibility, it’s not HMRC’s responsibilty, it’s your responsibility to check.
“If it’s wrong and you’re overpaying then they will owe you money.
“If it’s wrong and you’re underpaying then you will get a big demand – neither of which are particularly good.
“There are free tools online to check your tax code.
Those full or part-time employees, that receive a private pension, will have these as they are used by employer(s) or pension providers to calculate the amount of tax that should be deducted from wages or a pension before it’s paid into someone’s bank account.
The numbers show the amount that people can earn tax-free – aka their personal allowance.
People need to add a zero to get the real number, so 1257 means someone can earn £12,570 a year tax-free.
That’s the amount someone can earn in a year before their employer needs to deduct tax.
The size of this allowance depends on someone’s income and whether there are any deductions, for example, benefits at work such as a company car, discounted rent or medical insurance.
There are millions of errors on tax code letters, so Britons should never assume their code is correct.
If a tax code is wrong the first thing to do is tell HM Revenue & Customs (HMRC) that the tax code may be wrong, and why.
Britons can contact HMRC on 0300 200 3300 to speak to a member of their customer service team.
Alternatively, people can contact HMRC online via their personal tax account to let it know their tax code is wrong.
They can log in/set up an account using their Government Gateway or Gov.uk Verify ID.
