Receiving an incorrect tax code can result in paying too much tax throughout the year, leaving you with less take-home pay than you’re entitled to. Fortunately, you can correct your tax code and claim a refund for any overpaid tax from HMRC. This detailed guide walks you through how tax codes work, how to identify errors, how to get them corrected, and how to claim any refund you’re owed.
1. Understanding Your Tax Code
A tax code is used by your employer or pension provider to calculate how much income tax to deduct from your salary or pension. The code reflects your personal allowance and any adjustments HMRC deems necessary, such as benefits in kind, unpaid tax from previous years, or tax reliefs you’re entitled to.
For example, the standard tax code for 2023/24 is 1257L, which means you’re entitled to the full personal allowance (£12,570). Codes with additional letters (e.g. M, N, BR, D0, K) indicate specific circumstances, such as marriage allowance transfers or higher-rate tax on second jobs.
2. Common Reasons for Incorrect Tax Codes
There are several reasons why your tax code might be wrong:
- Change of job or multiple employments
- Receiving benefits in kind (e.g. company car)
- Incorrect reporting of taxable benefits
- Taxable state benefits like the State Pension
- Not informing HMRC about changes in circumstances
- Incorrect carry-over of underpaid tax from previous years
Always check your tax code when you receive your payslip or PAYE coding notice from HMRC to ensure it reflects your current situation.
3. How to Check Your Tax Code
You can find your tax code on your payslip, P60, or P45, or by logging into your Personal Tax Account on the HMRC website. Check that the personal allowance matches what you’re entitled to and that any adjustments (e.g. for benefits in kind or underpayments) are correct. Compare it against HMRC’s standard codes and your individual circumstances.
4. What to Do If Your Tax Code Is Wrong
If you spot an error, contact HMRC as soon as possible. You can:
- Call HMRC on 0300 200 3300 (have your National Insurance number and tax code ready)
- Use your Personal Tax Account to report changes online
- Write to HMRC explaining the issue with supporting documents
HMRC will review your details and issue an updated tax code to your employer or pension provider to correct future deductions.
5. How to Get a Refund for Overpaid Tax
If your tax code error led to overpayment of tax, you may be due a refund. Here’s how to get it:
Through Your Employer: If HMRC corrects your tax code during the tax year, your employer will adjust your future payslips and refund any overpaid tax automatically through PAYE.
Through HMRC Direct: If the tax year has ended or if you’ve left employment, HMRC will send you a P800 tax calculation letter outlining your overpayment and how to claim your refund. You can claim online via your Personal Tax Account or by requesting a cheque.
6. When to File a Self Assessment Tax Return
If your financial affairs are more complex (e.g. you have multiple income sources, or are self-employed), you may need to complete a Self Assessment tax return. Any overpaid tax identified through your return can be reclaimed, either as a bank transfer or cheque. Make sure to complete all relevant sections of the tax return to ensure an accurate calculation.
7. Record-Keeping and Evidence
Keep all relevant documentation, including:
- Payslips showing tax deductions
- P60 or P45 forms
- Benefit statements from your employer
- HMRC correspondence (e.g. coding notices)
This evidence can be essential if HMRC queries your claim or if there are discrepancies in the amounts calculated.
8. Avoiding Future Tax Code Errors
To avoid tax code errors in the future:
- Always inform HMRC promptly of changes in your circumstances (e.g. new job, new benefits, marriage allowance claims)
- Check your tax code every time you receive a payslip or P60
- Use your Personal Tax Account regularly to review your records
Being proactive ensures your tax code remains accurate and reduces the risk of over- or underpayment of tax.
9. When to Seek Professional Help
If your tax affairs are complex or if you’re unsure how to correct your tax code, consider consulting a qualified tax advisor. A professional can help you navigate HMRC’s processes, gather evidence, and ensure you get any refund you’re entitled to without unnecessary delays.
Conclusion
An incorrect tax code can mean paying more tax than necessary. By understanding how tax codes work, regularly checking yours, and correcting errors promptly, you can ensure you pay the right amount of tax and get any overpaid amounts refunded. Remember, keeping accurate records and being proactive is key to staying on top of your tax affairs and making the most of your income.
