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How to check your tax code and change it if needs be

What does my tax code mean?

Your tax code is made up of a series of numbers and letters and HMRC uses this to work out how much income tax you pay. 1257L is commonly used where you have one source of income, either through a job or pension, and means you can earn £12,570 a year (your personal allowance) before you start paying income tax.

You should have a different tax code for each income stream you receive, whether that is through work or via a pension.  Your tax code can vary from the standard if you receive benefits from your job, such as a company car or healthcare. HMRC can also apply a different tax code if it wants to claim back tax you’ve underpaid.

What is an emergency tax code?

If your circumstances change, for example, you start a new job, and HMRC does not receive your updated income details in time, you may be put on an emergency tax code temporarily. Emergency tax codes will appear as either 1257 W1, 1257 M1 or 1257 X. If you are placed on an emergency tax code, it means you will pay tax on all income above the basic personal allowance rate.

If you are employed, make sure you have provided your employer (if relevant) your P45 from your previous job who can then supply this to HMRC. If you have changed from self-employment to an employer, make sure you fill in a ‘starter checklist’ form, which will allow you to explain your prior employment circumstances. If you’ve started receiving the State Pension, check your tax code online to make sure this is included, and update your details if needed by getting in touch with HMRC.

How do I know if I’m on the right tax code?

If you haven’t checked your tax code(s) recently, now is a good time. You may discover that you’re not on the right one and could be over or underpaying HMRC. Our recent research found that more than two fifths (43%) of UK adults that have checked their tax code, have found they are on the wrong one. Of those who were on the wrong tax code 71% were overpaying tax on average, overpaying by £694. This totals £8.2bn in overpayments to HMRC because people are on the wrong tax codes and people have not checked this.

You can create an online account with Gov.uk here https://www.gov.uk/check-income-tax-current-year and check your income tax and personal allowance for the current year.

If you don’t want to create an account, you can receive an estimate of the tax you’re expected to pay using this online tool https://www.gov.uk/estimate-income-tax

Where can I find my tax code?

The most common places to find your tax code are as follows:

  • HM Revenue & Customs (HMRC) Online
  • Pension advice slip
  • Payslip
  • A P45 form
  • A P60 form
  • A PAYE slip

How can I change my tax code?

If you think your tax code is wrong, you need to contact HMRC directly. Your employer (if relevant) won’t be able to do this for you.  

You can check HMRC has your correct, up to date information online. If you’re on the wrong code you might need to update your employment details, or whether you’ve had a recent change in income.

You can contact HMRC via their helpline, post or social media if you need to speak to someone. 

How can I reclaim overpaid tax, or pay outstanding tax?

If you have found you have been on the wrong tax code, you may be owed a rebate, or you may owe money to HMRC.

HMRC may already be aware of this in which case you should be sent a tax calculation letter (a P800 form) or a Simple Assessment letter by the end of the tax year (April 5th), which will tell you how to pay HMRC or reclaim overpaid tax. Note that you will only be sent one of these forms if you are employed or receive a pension.

If you don’t receive one of these forms, then either head to this link if you believe you are owed money by HMRC, or contact HMRC directly via this link if you think you owe money.

Remember, there are time limits to reclaim overpaid income tax, which is four years from the end of the tax year in which you are trying to claim so if you are in any doubt, the earlier you contact HMRC, the better.