Millions of UK Workers Could Be Owed Hundreds Due to Tax Code Errors
New findings indicate that a significant number of workers across the United Kingdom are currently on incorrect tax codes, leading to substantial financial losses. According to recent research, millions of individuals are potentially missing out on an average of £689 each due to these errors.
The Impact of Incorrect Tax Codes on Personal Finances
If you are employed, paid through the PAYE system, or receive a private pension, your employer provides you with a tax code from HM Revenue and Customs. This code, visible on your payslip, determines the amount of income tax deducted from your earnings. When this code is inaccurate, it can result in either overpayment or underpayment of tax, disrupting your financial stability.
Research conducted by Canada Life last year highlighted that workers are collectively overpaying £5.8 billion to HMRC because of incorrect tax codes. It is estimated that approximately 31% of adults have experienced being on the wrong tax code at some point in their working lives.
How to Check and Correct Your Tax Code
HMRC typically updates tax codes using information received from employers or pension providers. Errors often occur when HMRC has incomplete or incorrect details. To ensure your tax code is accurate, follow these steps:
- Access the Online Service: Use HMRC's Check your Income Tax online service to review your details. This is the fastest method to verify and update your information.
- Review Your Information: Carefully check your employment status, pension details, estimated taxable income, company benefits, and expenses. Update any incorrect or missing information promptly.
- Claim Tax Relief: If you have eligible employment expenses, you can claim tax relief through the same online service.
- Obtain Necessary Documents: If you have left a job without receiving a P45 from your previous employer, request one to help update your records with HMRC.
What Happens After Updating Your Tax Code
Once HMRC processes your updated information, they will adjust your tax code if necessary. You and your employer will be notified of the new tax code within 15 working days. For monthly paid employees, the updated code should appear on your next or following payslip. For weekly paid workers, it should be visible on your third payslip.
If your new tax code does not appear on your payslip, contact your employer to confirm they have received the updated information from HMRC. Taking these proactive steps can help ensure you are paying the correct amount of tax and potentially reclaim any overpaid funds.
