Paying Too Much Income Tax?
Why you might have a wrong HMRC tax code
One of the most common reasons for paying too much income tax is that you have been assigned the wrong tax code. This can happen for a number of reasons such as when you change jobs and your new employer does not have the correct code so an incorrect or sometimes a temporary code is allocated to you. If you have returned to the UK from working overseas you may also be allocated the wrong code. Also if you previously received employee benefits such as a company car or private health insurance, but no longer do, then your tax code could be wrong.
How to check your HMRC tax code
Checking that you are on the right tax code is simple, and something you can easily do yourself. If you are employed (either full-time or part-time) your tax code is used so that your employer knows how much tax to deduct from your salary. The code is printed on your payslip and also on your P60. It is usually a combination of 2 or 3 numbers and a letter such as 735L, although there are some codes that do not follow this rule, for example, if you have two jobs then your code is likely to be different.
The numbers represent your annual tax free allowance and the letter relates to a specific tax type which can be determined by your age (people over 65 for instance will have a different letter from those under 65).
If you think you may be paying too much tax then visit the HMRC website to check you have the right tax code. If you think your tax code may be incorrect then you can contact HMRC and request a tax assessment. If you think you might not be paying enough tax it is still better to get the code reviewed otherwise the amount you owe the revenue will simply build up.
How to find out if you have been paying too much tax
Don’t worry too much if the over or under-payment has been going on for a long time undetected because HMRC will notify you if they think you have overpaid or underpaid after the end of the tax year. If you have over paid then you will usually get a refund in the July following the end of the tax year in which you overpaid tax and if you have underpaid you will be notified in the September following the tax year.
Under payments of less than £3,000 in a tax year will usually be deducted in installments from you salary over the nxt tax year but you can contact HMRC if this will cause you hardship to arrange a different schedule of payments. Large underpayments can usually be paid back by other methods.
But, ultimately it is much better to check your tax code and check how much tax you should be paying (both of which can be done via the HMRC website) before any under or overpayment of tax builds up.
If you have any questions about income tax or any other type of tax, then please contact our expert team of accountants in North London to talk things through.