HMRC issues tax code warning as thousands could be paying too much - are you owed money?

The taxpayer, who started a new job in September, received only £384.78 after taxes from a £511 gross payment. They queried this significant deduction on social media platform X (formally known as Twitter).

HMRC explained that the 0T code, often used when employers are unsure of the correct code, results in taxation of all income without a personal allowance.

In contrast, the 1257L code, typically applied to those with a single job, provides a tax-free allowance on the first £12,570 of annual income.

This case highlights the potential financial impact of incorrect tax codes on workers' take-home pay.

To check and correct tax codes, workers should first examine their payslips for the current code. The government's online tool, accessible through personal tax accounts on GOV.UK, can also be used to view and understand one's tax code.

If unsure about the accuracy of their code, individuals are advised to contact HMRC directly. The tax authority can investigate and make necessary adjustments.

For those who have recently changed jobs, the P45 form should display the correct tax code. Similarly, the P60 form shows the code used during the tax year.

HMRC's helpline (0300 200 3300) is available for those needing to update their tax code. Alternatively, the Ask HMRC online portal can be used.

Setting up a personal tax account on the Government website allows individuals to view their tax code and projected income tax payments for the current tax year.

Several factors can lead to incorrect tax codes. Multiple jobs or pensions can complicate the calculation, potentially resulting in under- or overpayment of tax.

Employer mistakes in reporting data to HMRC may also cause errors. Benefits in kind, such as company cars, should be included in tax codes but are sometimes overlooked.

Life changes like marriage or moving home can inadvertently affect tax payments. These situations underscore the importance of regular tax code checks.

Experts from Digital PR Lab emphasised the need for vigilance to avoid costly HMRC mistakes. They recommend regular reviews of tax codes to prevent financial consequences.

Common tax codes include BR (all income taxed at 20 per cent), D0 (all income taxed at 40 per cent), and 0T (no tax-free personal allowance).

Workers are urged to be proactive in monitoring their tax situation to ensure accuracy and avoid unexpected bills or underpayments.

If a tax error is discovered, HMRC advises taxpayers to contact them immediately to update personal or financial information. Those who have overpaid may be eligible for a refund.

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In cases of underpayment, it's possible to discuss a manageable repayment plan with HMRC. Taking swift action can minimise any negative financial impact.

HMRC emphasises the importance of providing accurate details to employers to avoid issues like the 0T code being applied unnecessarily. This code is often used when insufficient information is available to determine the correct tax code.

For those unsure about their tax situation, HMRC provides various contact options. These include their helpline, the Ask HMRC online portal, and the option to set up a personal tax account on the Government website.

Regular checks and prompt communication with HMRC are key to maintaining an accurate tax status and avoiding unexpected financial consequences.