ITV finance expert Martin Lewis has issued a fresh warning to all of the United Kingdom's workers - urging them to look out for a ‘X’ on their payslips.
Appearing on his ITV Money Show Live this week, the MoneySavingExpert founder accepted questions from viewers across the country.
One of whom called Tina announced that she had been overtaxed by the Government and was wondering if she would get a rebate because of this.
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Explaining her circumstances, Tina said: “I’m on a 16 hour contract, and last month, I did lots of overtime. I was put on the basic rate temporarily and overtaxed by more than £800. My tax code is now back to 1257L, but I’m short £500, worrying about money."
She then went on to ask: "Will I get a tax rebate?”
Martin went on to redirect the question to taxes expert Rebecca Benneyworth, who in-turn provided some information on how the system works. She responded: “It depends whether she’s on a Month One tax code or not. Month One is often referred to as Emergency Code.
"If she is, she needs to sort that with HMRC, either by phoning them or by going into her personal tax account through the HMRC app."
According to the tax guru, employees should look out for an 'X' on their payslip should they fear they are being overtaxed - as it is a sign of an emergency tax code. These are assigned when the HMRC hasn't collated all of the correct information to estimate how much tax you need to hand back to the Government.
This often happens when employees start new jobs.
Rebecca continued: “On her tax code, she’ll have 1257L. If she’s got an ‘X’ on the end (1257LX), she’s on Month One. Otherwise, if it’s not got an ‘X’ on the end, it should come back in her next pay packet.
"If it doesn’t, speak to your employer.”
Likewise, in the case that you've been given an emergency tax code, you may see 1257 W1 or 1257 M1 on your pay slip. While it is often a temporary system put in use by the HMRC, the rates of tax you'll cough up for that period are much higher than the usual tax others pay.
This in-turn means you end up giving more back than what is needed. However, this will be given back eventually by the Government in the form of a tax rebate.
Martin added: “If you’ve got the wrong tax code, go to HMRC. If you’re not getting the tax back, go and talk politely to your employer. Many payroll departments are actually pretty helpful if you’re struggling with this."
He then went on to advise all employees to check their tax codes to make sure they're not on an emergency code - before breaking down tax. He continued: “Each year, you’re sent your tax code if you’re an employee. The standard one is 1257L. What that actually means is £12,570, which is how much you can earn tax free each year.
“Millions of people are on the wrong tax code. Some are overpaying and are therefore due thousands of pounds back. Some are underpaying and are therefore going to get a shock as they’re asked for more money.
“So it’s really important, because it's your legal responsibility - not HMRC, not your employer - to check your tax code."
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