HM Revenue and Customs (HMRC) has issued a stark warning to thousands of workers across the United Kingdom, emphasising the critical importance of checking a specific detail on every single payslip they receive. The alert focuses on the necessity for taxpayers to ensure their tax codes are accurate to avoid facing a potentially "huge adjustment" in their annual tax bill.
The Official HMRC Guidance
HMRC has reiterated that every individual is personally responsible for the correctness of their own tax code. The tax authority has highlighted that managing and updating a tax code can be done swiftly and simply through the official HMRC app or via an individual's online tax account. This proactive approach is designed to empower taxpayers and prevent common errors from escalating into significant financial issues.
Expert Insight from Tax Professionals
Arjun Kumar, the founder of the accountancy service Taxd, has strongly advised workers to make it a routine practice to examine their tax code on every payslip. He stressed that early detection of any discrepancy allows for quicker rectification. Kumar warned that tax code errors often accumulate over time, making it essential for individuals to stay vigilant and on top of their financial affairs.
"If you suspect your tax code might be incorrect, you should immediately check your payslip or any P800 tax code notice letters you have received," Kumar explained. "These documents will clarify how much income HMRC believes you earn and provide the reasoning behind your current tax code assignment."
Practical Steps to Verify Your Tax Code
Taxpayers have several straightforward options to verify and correct their tax codes:
- Online Account Review: Log into your personal HMRC tax account to scrutinise your PAYE income details. You can add or remove income sources as necessary to ensure your tax code reflects an accurate financial picture.
- Direct Contact: You can also telephone HMRC directly to discuss and check your tax code. If an error is confirmed, HMRC can then issue a corrected code to your employer in time for the next payroll cycle.
High-Risk Groups for Tax Code Errors
Kumar identified several categories of workers who are particularly vulnerable to incorrect tax codes:
- High Earners: Individuals with substantial incomes are always at risk because their personal allowance gradually tapers. An incorrect code here can lead to significant under or overpayment.
- Roles with Fluctuating Income: Employees in sales or commission-based positions, where income varies monthly, often experience frequent tax code changes. These codes can be incorrect, leading to complex year-end reconciliations.
- Multiple Job Holders or Recent Job Changers: People with more than one job or those who have recently switched employment are frequently placed on emergency tax codes. This typically results in being overtaxed initially.
Kumar also highlighted a contrasting risk: "On the flip side, if a full personal allowance is incorrectly applied to two separate jobs, the individual is likely underpaying their tax liability. This is another scenario that requires careful monitoring."
The Financial Impact of Errors
The potential consequences of an incorrect tax code are financially substantial. For instance, if a full personal allowance is erroneously removed from a taxpayer's code, it could result in paying approximately £2,500 in additional tax over the course of a year.
Similarly, for workers receiving one-off payments like bonuses or commissions, if this income is taxed at the basic rate of 20 percent instead of the higher rate of 40 percent, it could precipitate a "huge tax adjustment" when the annual tax return is finalised. This underscores the critical need for ongoing payslip vigilance as advocated by both HMRC and tax experts.
