HMRC blunders could hit Brits with a surprise tax bill this December, but others might actually pocket extra cash for the holiday cheer, experts warn.
BizSpace’s expert team is highlighting the risk of coughing up too much to HMRC without realising it, or facing a nasty unexpected tax bill after the holidays.
The experts pointed out that the devil is in the detail – specifically, your tax code, easy to spot online or on your pay slip, P60, or P45.
They warned: “Keeping an eye on your tax code and understanding its implications is essential for managing your finances effectively.
“Mistakes can happen, but by staying proactive and informed, you can catch errors early, avoid unexpected bills, and ensure you’re not paying more than you should.”
Your tax code consists of letters and digits indicating what you owe the taxman, based on your job, wage packet, and personal circumstances.
For example 1257L, the standard code representing the typical £12,570 Personal Allowance most earners get before income tax is incurred.
The BR tax code means that all income is taxed at the basic rate of 20%, while the D0 code signifies that all income is taxed at the higher rate of 40%. The 0T code, which is also common, indicates that you don’t have any tax-free personal allowance.
This usually applies if you’ve started a new job but used up your allowance for the year at your previous job. There are many other codes that indicate varying degrees of tax liabilities and having the wrong one could mean you’re either overpaying or underpaying taxes.
This can result in unexpected refunds or tax bills, with the latter potentially coming with interest and penalties too.
The experts are urging people to correct their incorrect tax codes before December, to either increase their take-home pay or ensure they aren’t hit with hefty HMRC bills during the holiday season.
You can do this by contacting HMRC with your updated personal and financial information proving that you have the wrong tax code. While in contact with HMRC, you can apply for a refund if you’ve overpaid taxes.
If you’ve underpaid, you can also use this time to discuss a repayment plan with the department that will suit both your tax liability and financial situation.
