One common cause of error is HMRC issuing an incorrect tax code for the payslip employers provide you with, and inadvertently inflating the sum you should really be paying. This can happen for various reasons, including:
- changes to your employment circumstances which HMRC hasn’t taken into account due to a lack of up-to-date information
- workers switching jobs, or seeing a marked change in income which hasn’t been declared
- HMRC may have also made wrong assumptions about an employee still being in receipt of company benefits-in-kind, such as private health insurance or a company car
- HMRC mistakenly factoring in additional income, like freelance work or rental income, that you don’t have anymore
Oversights are important to look out for as you could be wrongly inflating the sum you’re asked to pay.
Neela Chauhan, a partner at UHY Hacker Young says: “Millions of people are paying the wrong amount of tax simply because HMRC is almost guessing what they earn,” she said.
“For too many people, this will go completely unnoticed”, she continued. « HMRC won’t always correct overcharging mistakes automatically. If you don’t check your tax code or your PAYE [pay as you earn] calculation, you may never get your money back.”
Ms Chauhan says it’s therfore important to scrutinise your own tax codes and year-end PAYE summaries to make sure they’re correctly assigned, especially taxpayers who have « any form of non-PAYE income or company benefits ».
The Gov.uk website explains that numbers and letters in your tax code are supposed to reflect to your situation, how it affects the amount you can earn without paying tax.
The Personal Allowance, or the amount you can earn before paying tax is £12,570. For most people with one job, the tax code will be 1257L, relecting the Personal Allowance figure (minus the 0 on the end), and the fact that you’re entitled to the standard tax-free personal allowance (L).
You can find the full list of tax codes and what they mean here, as well as information on how to access your taxcode online.
Alternatively you can learn more in our tax code explainer.
HMRC says while taxpayers are responsible for their returns being correct, the majority of repayments are paid promptly, and that it is investing £500million in digital services to help customers pay the correct amount the first time.
