The Martin Lewis Money Show Live returned to STV on Tuesday night for the first time since November in a jam-packed hour covering crucial cost of living advice on expiring energy vouchers, reducing your monthly Direct Debit fuel bills, price cap predictions for summer and social tariff broadband deals.
The host of the award-winning consumer programme wasted no time telling viewers within the first few minutes to check that their tax code is correct after David got in touch with the show to share that his wife had followed Martin’s previous advice on the topic and received a hefty refund for over £2,500 as a result.
Co-presenter Angelica Bell, read out David’s email which said: “I want to thank you for reminding us to check our income tax codes. It turns out my wife has been on the wrong code for four years and she has just received a refund cheque for £2,585.”
The consumer champion called it a “very important reminder” for people in work and those receiving a pension to check their tax code is correct.
He told viewers that it is not the responsibility of employers or HM Revenue and Customs (HMRC) to check if a tax code is correct, it is theirs.
But he warned that it works both ways because if you’re paying too much tax, you will get it back, but similarly, if you’re not paying enough, you’ll have to pay what you owe.
Martin said: “If you’re an employee or getting a pension you will be sent tax code. The standard one is 1257L.
“Now, what you have to understand, even if you don’t know what the number means, it is your legal responsibility to ensure that it is correct, it is not your employer’s, it is not the tax office, it’s yours.
“If it’s wrong you might be overpaying tax in which case you’ll get a refund which is great.
“Or you could be underpaying tax, in which case they’ll come and they say ‘you owe us money’ and when the tax office wants money you have to pay the tax office money.”
He added that there are tools online where you can check whether your tax code is correct and emphasised that it crucial to check it now, especially if you are self-employed and filing your Self Assessment tax return this month.
He said: “It is an important piece of work, get online, check your tax code is right, you might be owed money or it might stop you having to pay even more back in future.”
You can check if you may be due a tax refund using the free calculator on MoneySavingExpert.com here.
Checking your tax code
The easiest way to do this is to look at your payslip. One you have a note of your Personal Allowance tax code, you can go to the GOV.UK website and use the online “Check your Income Tax for the current year" service.
This tool, which covers the current tax year, can be used to check your tax code and Personal Allowanc e, and to see if a tax code has changed.
Other options available through this online service include allowing users to see an estimate of how much tax they will pay over the whole tax year. However, the service cannot be used by self-employed workers.
The GOV.UK website explains: "You cannot use this service if Self Assessment is the only way you pay Income Tax.”
What the tax code numbers mean
The numbers in an employee’s tax code show how much tax-free income they get in that tax year, this is known as your Personal Allowance. You usually multiply the number in the tax code by 10 to get the total amount of income they can earn before being taxed.
For example, an employee with the tax code 1257L can earn £12,570 before being taxed. If they earn £30,000 per year, taxable income is £17,430 (£30,000 - £12,570).
What the letters mean
Letters in an employee’s tax code refer to their situation and how it affects their Personal Allowance.
The full list of tax code letters and what they mean can be found on the UK.Gov website here.
Most commonly used letters:
L - For an employee entitled to the standard tax-free Personal Allowance
S - For an employee whose main home is in Scotland
BR/ SBR - For a second job or pension
M - For an employee whose spouse or civil partner has transferred some of their Personal Allowance
N - For an employee who has transferred some of their Personal Allowance to their spouse or civil partner
T - When HMRC needs to review some items with the employee
If your tax code has ‘W1’ or ‘M1’ at the end
W1 (week 1) and M1 (month 1) are emergency tax codes and appear at the end of an employee’s tax code, for example ‘577L W1’ or ‘577L M1’.
The tax code letter ‘K’ is used when deductions due for company benefits, State Pension or tax owed from previous years are greater than their Personal Allowance.
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