Martin Lewis has urged millions of Brits earning more than £12,570 to check their tax code immediately to avoid losing thousands of pounds. The Money Saving Expert issued the alert on his podcast, urging workers and pensioners to check their codes, because millions of errors happen annually.
While many may assume the responsibility to correct the code lies with HMRC, Mr Lewis said it actually lies with the taxpayer. He urged: “Do you know what your tax code is? If you’re an employee, you need to, because millions of them are wrong each year. And if they are wrong, legally it’s your responsibility, not your employer’s and not HMRC’s, to ensure it’s correct.”
The codes are important because they show your employer or pension provider how much tax-free income you are entitled to.
Some people may be paying too much tax and could be due a healthy rebate. However, Martin Lewis has warned that paying too little tax can lead to serious problems.
He cautioned: “At some point they will catch up and make sure you pay the tax that you owe. You could be hit, slapped across the face with a big tax bill and not have the cash to pay it, » reports GB News.
Mr Lewis advised employees to check their code every year, and urged people who have never done so to check it immediately. Pensioners could also be impacted if their income exceeds the tax-free threshold.
You can find the code on your payslip, or in your Personal Tax Account on GOV.UK.UK website. To understand your income tax code, simply multiply the number by ten. The most common is 1257L, which means you can earn £12,570 tax-free annually.
Errors are most likely to happen when your circumstances change, like getting a new job, and the information given to HMRC is outdated or incorrectly processed. It could also happen if you have multiple income sources or unreported benefits-in-kind, like a company car.
The department advises taxpayers to inform them promptly when circumstances change to help ensure codes remain accurate.
Here are the most common tax-code letters, and what they mean:
