7 common reasons you could have the wrong Tax Code

*Please note the information in this article may be out of date

Your Tax Code tells your employer how much tax to take off your pay. What if your code is wrong? In the past 4 years, 1 in 3 employed taxpayers have been overcharged tax because their employer has received the wrong code from HMRC!

Thu, 08 Nov 2018

Depending on your circumstances, HMRC can change your code so you pay less tax. That gives you extra money in your take-home (net) pay, which can be used to help cover certain costs. However, it’s up to you to ask HMRC to do this.
Here are 7 reasons you might have been using the wrong code and an easy way to find out if you have.

1. You spend your money on work related expenses

If you spend your money on job related things such as washing your uniform, buying equipment to use at work, or using your own car to travel for your job, HMRC can contribute towards the costs. 

2. You work at home some, or all, of the time

Working at home costs you money. You have to pay for extra heating, electricity, and water and in some cases, insurance. As long as you meet the requirements, HMRC will help towards these costs.

3. You are a member of an organisation

HMRC can help pay the costs of subscription fees where you are a member of a professional body or a trade union. The amount they will pay depends on the organisation.

4. You pay into a pension

Depending on how much you earn, you can claim money back from HMRC to help fund your pension payments.

5. You are married

If you are married and your spouse or civil partner doesn’t use all their tax free annual personal allowance, as long as you meet the conditions, you can have some of it to reduce your tax bill.

6. You have moved jobs

When you move jobs, your new employer might not be given your tax code straight away. Where that happens, they must take extra tax off you until HMRC sends them your code, at which point your employer gives you back some of the extra tax they took.  Sometimes HMRC does not send the code in time and unless you notice, you do not automatically get your money back.

7. You have been given a new code for one of the reasons above, but it is wrong

Even though HMRC may have given you a new tax code, it can still be wrong or if you have had your code for some time, it might not have been updated to take account of the current costs. There are also times when HMRC simply gets it wrong.

Your tax code is your responsibility. It is up to you to make sure the code your employer is using is correct. Fortunately, if they have been using the wrong code in the past 4 years and you have paid too much tax, HMRC will refund your money.

If you know what you are doing, you can organise this yourself. Alternatively, you can let a tax code expert handle the whole exercise for you.

Next Steps

Listentotaxman has teamed up with tax code experts The Tax Refund Company, to offer you access to their tax code assessment tool.

The Tax Refund Company, established 25 years ago, has worked with over 550 employers, trade unions and professional bodies to help their employees and members check their tax codes.

How does it work? 

Step 1 is simple - you fill in the simple assessment form and it indicates whether you may have been using the wrong tax code and if so, be due a refund – this only takes a few minutes and no personal details are needed. At this stage you won’t even need your tax code.

Step 2 - If you get a positive result, then you’ll be asked more questions tailored to your personal circumstances to enable the The Tax Refund Company to carry out a comprehensive review of your tax and help you get back any tax you have over-charged in the last 4 years. Typically, 1 in 3 people receive money back from HMRC.