Almost half of UK employees have paid too much tax because they are on the wrong tax code, or through errors with deductions.
That means 14.3 million people are possibly out of pocket. And already 2.8 million people say they have been affected in the past year alone.
And HMRC are not responsible for telling you you’re paying too much.
The research of more than 2,000 people in the UK also suggests there is confusion when it comes to
On top of this, 60 per cent of employees (13 million) don’t realise having multiple jobs can affect Income Tax.
Shaun Shirazian, Head of Product at Intuit QuickBooks UK, the organisation that carried out the the research, said: “Many of us can feel a bit lost when checking our payslips and feel unsure about the multiple factors that contribute to our adjusted pay.
“Taxes are complex and the research shows that significant overpaying of tax is caused by payroll issues, such as being on the wrong tax code, or errors with deductions such as childcare vouchers.”
The most common tax code in the tax year of 2019 to 2020 is 1250L.
However, there are a whole host of reasons why the letters and numbers in a tax code may differ to this.
In order to determine a person’s tax code, HMRC works out the taxpayer’s tax-free Personal Allowance.
The income that tax has not been paid on (such as untaxed interest or part-time earnings) and the value of any benefits from one’s job are then added up.
The income that tax has not been paid on is then deducted forth Personal Allowance, with whatever is left being the tax-free income one is allowed in the tax year.
Finally, the last digit of this tax-free income amount is removed, forming the number in the tax.
What do different tax codes mean?
If you’re under 65 and earn less than £100,000 a year, the chances are this’ll be your code. C
T and 0T
These codes say other calculations are needed to work out your Personal Allowance. Perhaps you earn more than £100,000.
M and N
M or N signals you’re using the Marriage Allowance, letting you transfer £1,250 (10%) of your Personal Allowance to your husband, wife or civil partner because they earn more than you.
BR, D0 and D1
More than one job? You’ll find one of these codes on your payslip or pension notice.
No tax because your total income is less than your Personal Allowance or because you’re a self-employed contractor who is liable to pay National Insurance but not Income Tax.
You have income that is not being taxed but it’s worth more than your tax-free allowance, either from owing tax from a previous year or receiving a company or state benefits.
W1 and M1
Emergency tax codes.
If you think your tax code might be wrong, you can use HMRC’s Income Tax service.
If you can’t use the online service, contact HMRC instead.
If an error is identified, the money will be refunded back to you. If what you are owed is from the current tax year, then any money will be refunded.