Workers are being urged to check their pay slips after new tax year and national insurance changes came into effect.
Finance guru Martin Lewis has told workers to make sure they've not been overcharged by the tax office. Tax codes are used by HMRC to determine how much tax you should pay each month.
Each code is made up of numbers and letters which represent how much a person should earn before being taxed. If you've had a pay slip since April 6, you can check now to see if you're on the right code.
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If you're not, you may be able to reclaim cash you have overpaid. It could also show whether you're underpaying tax, to help you avoid what Mr Lewis calls a "future nightmare", the Mirror reports.
Workers who are unsure what code they should be on can look at their payslip, P45 or P60 form. Ask your human resources department for these if you need assistance in locating it.
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, although not for a few months yet. Your tax code might be wrong if you've recently changed jobs, have more than one income or recently moved to different hours after being on furlough during the pandemic.
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.
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, although not for a few months yet.
Your tax code might be wrong if you've recently changed jobs, have more than one income or recently moved to different hours after being on furlough during the pandemic. People who have just started their first job are often put on an emergency tax code, and will wrongly be charged a higher rate.
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 overpaid 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.
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