Millions Urged To Check Tax Codes As Errors Remain Common

Many UK taxpayers are affected by incorrect tax codes each year, according to statements from financial experts. Individuals are required by law to ensure their tax codes are accurate, as errors may result in either overpayments or underpayments of tax.

Martin Lewis and tax expert Rebecca Benneyworth have both stated that responsibility for checking tax codes rests with the taxpayer, not with HMRC or employers. They have highlighted that incorrect tax codes can lead to future tax bills if too little tax is paid, or refunds if too much has been deducted.

Tax codes such as 1257L are meant to reflect the personal allowance, but these codes may become inaccurate if a person’s income or circumstances change. HMRC typically updates tax codes automatically using information from employers, but mistakes can occur if the data provided is incomplete or incorrect.

Individuals can review their tax code through several channels, including their personal tax account, payslips, official correspondence from HMRC, or the HMRC app. If an error is found, taxpayers can contact HMRC by phone or live chat to request a correction and arrange any necessary refunds or payment plans.

What the numbers show

• Interest charges on underpaid tax due to incorrect codes can be around 7.75 percent
• One listener received nearly £2,000 after correcting their tax code
• Another individual obtained a £9,400 refund after updating an outdated tax code
• Taxpayers can reclaim overpaid tax for up to four years, according to HMRC

At the end of each tax year, HMRC sends out a P80 or assessment letter to reconcile any overpayments or underpayments. This process is designed to ensure that taxpayers pay the correct amount, but errors in tax codes can still result in discrepancies that must be addressed by the individual.

MoneySavingExpert provides a free tax code calculator to help people determine if their tax code is correct. This tool can assist taxpayers in identifying potential mistakes before they result in financial consequences.

Martin Lewis has cited several cases where individuals received substantial refunds after correcting their tax codes. These examples demonstrate the possible financial impact of not reviewing tax codes regularly.

HMRC allows claims for overpaid tax to be made for up to four years, giving taxpayers an opportunity to recover money if errors are identified. Regularly checking and updating tax codes can help avoid unexpected bills or missed refunds.

* This article is based on publicly available information at the time of writing.