HMRC has issued a warning about a common situation where you could end up on the wrong tax code and overpay tax.
The issue came to light after a customer got in touch over X concerned with the amount of tax they had paid.
They asked: “I got paid £384.78 after taxes – it was £511 before. Why is it deducted that much: is it emergency tax?”
HMRC responded to ask what tax code their employer had used when making the payment.
They replied to say they were on 0T although they believed they should be on 1257L, the most common tax code.
The 1257L often applies if you have just one job and means you have the full entitlement to the personal allowance, with no income tax to pay on the first £12,570 of your income each year.
After being asked for further details, the taxpayer said they had started working for the employer in September this year and that they had not been in previous employment and had a P45 since 2022/2023.
HMRC also asked them if this was their first job since the start of the current tax year, which began on April 6. The individual said it was their first job since then.
The tax body then set out some important principles about tax codes. They said: “Most employers use a 0T tax code when they are unsure what your tax code should be.
“In that case, you’ll need to contact our helpline to update your tax code. When your employer uses the new tax code, it will calculate any overpaid tax and refund in your pay.”
If a person is on the 0T tax code, this means they have no personal allowance and so will be taxed on all their income, even if they are earning a very small amount.
This code is often used when a person has not given enough details to their employer for their tax code to be worked out.
HMRC also directed the concerned individual to a webpage with information about how to raise a query about income tax.
You can call the HMRC helpline on 0300 200 3300 or use the Ask HMRC online portal. Another option is to set up a personal tax account on the Government website, where you can see your tax code and your projected income tax payments for the current tax year.
