Yahoo News Brits urged to fix ‘costly HMRC mistake’ as soon as possible
As household budgets get increasingly tight amid the cost of living crisis and the upcoming holiday season, experts are urging Brits to make sure they’re keeping a firm grip on every penny they deserve. The team at BizSpace warned people could be unknowingly overpaying HMRC, leaving them with less than they should have or could receive a devastating surprise tax bill after the holidays.
The experts explained the key to this potential HMRC mistake is hidden in your tax code, which can be found online, on paycheques, P60 or P45s. They warned: “Keeping an eye on your tax code and understanding its implications is essential for managing your finances effectively. Mistakes can happen, but by staying proactive and informed, you can catch errors early, avoid unexpected bills, and ensure you’re not paying more than you should.”
Your tax code should be a combination of numbers and letters which indicate how much tax you should be paying based on your employment, salary and circumstances. For example, the standard tax code is 1257L, referring to the Personal Allowance most people have of £12,570 that they can earn tax-free each year.
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The BR tax code indicates that all income is taxed at the basic rate of 20%, while the code D0 indicates that all income is taxed at the higher rate of 40%. 0T is also a common code indicating that you don’t have any tax-free personal allowance, which usually applies if you’ve started new work but your allowance for the year was used up at your previous job.
Many other codes indicate a varying degree of tax liabilities and having the incorrect one could mean you’re either overpaying or underpaying taxes. This will lead to unexpected refunds or tax bills, with the latter potentially coming with interest and penalties too.
The experts urged people to fix their incorrect tax codes before December, to either boost their take-home pay or ensure they aren’t getting slammed with devastating HMRC bills in the midst of the holiday season. You can do this by contacting HMRC with your updated personal and financial information proving that you have the wrong tax code.
While in contact with HMRC, you can apply for a refund if you’ve overpaid taxes. If you’ve underpaid you can also use this time to discuss a repayment plan with the department that will suit both your tax liability and financial situation.
