Guide to HMRC tax codes and how to find out if you're owed £689
08.05.2024 - 14:59
/ manchestereveningnews.co.uk
Understanding how much money is being taken off your salary by HM Revenue and Customs (HMRC) each month is rarely simple and correcting any mistakes can often be time-consuming and worst of all, dull.
With National Insurance Contributions, pension payments, and student loans subtracted from your pay packet each month, it might not always seem simple to figure out if you are being paid what you should be. However, a little bit of tax code knowledge can make your life much easier.
The Government raked in £5.8bn from tax overpayments in the past financial year, which works out as an average of £689 in overpaid tax per person. Anyone who has paid too much tax can claim it back from HMRC, but first they must find out their current tax code.
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Adam Bennett, a workplace expert from Digital ID, says: "Keeping an eye on your tax code and understanding its implications is essential for managing your finances effectively. Mistakes can happen, but by staying proactive and informed, you can catch errors early, avoid unexpected bills, and ensure you’re not paying more than you should."
A tax code is a combination of letters and numbers that represents the amount of tax-free income you're entitled to in a tax year. For instance, the code "1257L" for the 2023-24 tax year means you have a Personal Allowance of £12,570 before paying tax on the remaining income.
Common tax codes include:
How to Check Your Tax Code
Having multiple sources of income may lead to tax miscalculations if HMRC doesn't allocate the correct allowances across them. This can include pension or redundancy payments.
Or, commonly, employers might accidentally report