Financial expert Martin Lewis is urging workers to check their pay slips to make sure their take-home salary is correct. It comes a month after the start of the new tax year, which brought changes to how much employees are deducted.
Mr Lewis said workers should make sure they are not being overcharged by the tax office. This involved making sure you're on the right tax code.
If it's wrong, you might be able to reclaim any overpaid tax, reports the Mirror. By the same virtue, checking your pay slip will also alert you if you're paying too little tax, meaning you can "avoid a future nightmare", said Mr Lewis.
Any employee who's not sure what their tax code shoudl be can check their pay slip, a P45 or their annual P60 document. HR departments can provide these if you're not sure how to get them.
If you have just one employer and earn under £100,000, your code is likely to be 1257L. The biggest change you’ll notice on your payslip is an increase of how much National Insurance you’re paying.
National Insurance contributions have just increased by 1.25 percentage points, from 12% to 13%. The threshold for when you start paying has also just gone up from £9,568 to £9,880 - but this is due to rise again, and by a bigger jump, from July.
The rate at which you start paying will go up to £12,570 from July 6 - meaning more low income workers will keep more pay in their pockets. Your tax code might be wrong if you've recently changed jobs, have more than one income, or have recently moved to different hours after being on furlough during the pandemic, for example.
It can also be affected if part of your salary is made up of company benefits or any salary sacrifice schemes. People who have just started their first job are often put on an emergency tax code, and will wrongly be charged a higher rate.
How to check your tax code
You should have recently received a letter from HMRC ahead of the new tax year with your new code. This might have been provided digitally.
Otherwise, you can find your tax code on your latest payslip, or on your P45 if you have recently quit your job. Gov.uk also has a dedicated webpage when you can see your tax code.
To check it online, you will need to register for a government gateway ID - this is free to do. The most common code for the current tax year is 1257L for people who have one job or pension.
But not everyone should be on this tax code - for example, people who have more than one job. MoneySavingExpert has just updated its free tax code calculator so you can get a rough idea as to whether yours is correct.
To check yours, you need to enter your earnings before tax and your current code. No tax calculator will be able to tell you for definite if you are on the right code - but this should give you a good indication.
How to claim back tax
If you suspect you've been overpaying, you can contact HMRC on 0300 200 3300. You can also speak to an advisor online via their live chat service.
HMRC will contact your employer to correct your tax code, and you'll get back any owed tax in your next payslip. If you have been overpaying tax for some time, you can claim back up to four additional years - so as far back as the 2018/19 tax year.
But if you have been underpaying, you will need to pay your tax back. It is better to sort this out sooner rather than later to avoid having to pay back a larger sum.
How much you pay back, and how often, will vary depending on your circumstances. You can also try and get the tax written off if it was not your fault that you underpaid - but this is not a guarantee.
You can do this by asking for a so-called "Extra Statutory Concession" or an A19 from HMRC.
