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How much have you saved with your new tax code?

At the start of every tax year, HMRC issues all UK taxpayers with a new tax code. It is how HMRC tells you, your employers and others, how much tax you should be paying.

How does my new tax code save me money?

The equation used to calculate your new tax code includes alterations to the amount of Personal Allowance you are entitled to.

Tony Shanks, Operations Director of Tax Rebate Services, explains: “The recent Personal Allowance increase means that taxpayers can earn £350 more before they start paying Basic Rate tax, as it has gone up to £11,850. It’s also good news at the other end of the scale, with the Higher Rate baseline rising to £46,350; that’s an increase of £1,350. So taxpayers will only be paying the Basic Rate of 20% on their earnings up to £46,350.”

What does my tax code look like?

Your tax code is a combination of letters and numbers, usually written as three or four numbers, followed by one letter. Each of these numbers and letters represent something about your employment situation that tells employers how much tax you should be paying.

Where can I find my tax code?

Your tax code will be on your payslips and other official paperwork like P45s and P60s. If you can’t find your tax code, get in touch with HMRC.

Why is it important?

Your tax code is important because it is important that you pay the correct amount of tax. You need to pay enough, or you open yourself up to potential extra bills and possible prosecution. You don’t want to pay too much because that’s just not fair. Tax codes are issued by HMRC employees and people sometimes make mistakes. You need to understand your tax code, check that it is correct and rectify any mistakes straightaway. This is not HMRC’s responsibility, it is yours.

You can find other information about your Tax Code in our Tax Code Guide. This includes explanations of other things like what the letters and numbers in your tax code mean, emergency tax and ‘P2 Notice of Coding’.

What to do if you find a tax code mistake

Tax code mistakes happen most often when taxpayers have more than one source of income or start a new job and are ‘emergency taxed’. As soon as you notice a possible mistake, get in touch with your tax expert and/or HMRC. They will be able to help sort out the situation and advise you on reclaiming any overpaid tax you are owed.

TaxBanana

April 5th, 2018|tax codes|

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