7 hours Ago By Samantha Leathers
As we enter a new tax year, many individuals will receive updated tax codes. However, if these are incorrect, they could result in paying more than necessary to the taxman, or facing backdated bills from HMRC in the future. Tax codes are assigned by HMRC based on individual income levels and tax liabilities.
Essentially, it's a series of numbers and letters that dictate how much income tax should be deducted from your earnings. If this code is incorrect, you may end up paying more tax than required. You can only claim this back for the past four tax years, which currently extends until April 2021.
On the other hand, if you've underpaid tax due to an incorrect tax code, you'll need to repay this to HMRC . This can also stretch back four years, six if you acted recklessly, and if found to be acting deliberately, HMRC could demand tax payments from the last 20 years, as per MSE . The amount you can claim back or need to pay depends on why your tax code is incorrect.
It could be due to an error on HMRC 's part, through your employer, or your own personal mistake if you fail to report changes in your circumstances that affect your tax liability. Regardless of the reason, it's crucial to keep a close eye on your tax code in April during the new tax year to prevent potential years of financial damage. The most common tax code for standard rate taxpayers is 1257L.
This indicates that you have a personal allowance of £12,570 that you can earn every tax year before you need to pay income tax. If you have more than one job, you might see a BR tax code on your second job, which means all income from that job must be taxed at the Basic Rate. The code NT signifies that you don't pay any tax on this income, while 'S' indicates that your income or pension is being taxed using the Scotland rates.
Codes ending with W1, M1 or X are emergency tax codes. Emergency tax codes are typically assigned to individuals if HMRC lacks essential details about your income, such as when changing jobs, starting work with an employer after being self-employed, or receiving a state pension . These codes are temporary, so it's vital for those who notice this on their payslips to ensure it gets changed once the necessary details have been provided.
You can find other tax codes and their meanings on Tax Aid . To discover your actual tax code, you can check your payslips from April 2025 onwards, or by viewing your personal tax account on HMRC 's website. It's crucial to check the tax code on each job or pension if you have multiple.
If you suspect your tax code is incorrect, you can utilise this tool on Gov.uk to verify your code and rectify any outdated or inaccurate details that led to the error..
