HMRC has reminded taxpayers that it’s down to them to make sure they have a vital detail correct. It’s important to have your basic information with HMRC all up-to-date, or you could pay the wrong amount of tax.
Having the wrong information on your record could mean you pay too much or not enough tax on your work or pensions income. If you don’t pay enough for an extended period, you could end up with a large bill to pay.
You can view many of the details that HMRC has on file for you through your online personal tax account or in the HMRC app. You can set up your personal tax account on the Government website, while you can download the app from the Apple app store or from Google Play.
One element of your details that it’s crucial to have correct is your tax code. This determines the amount of tax you should pay on your income.
A HMRC spokesperon said: “Everyone is responsible for ensuring their own tax code is correct, and they can manage and update their tax code quickly and easily on our app or via their online tax account.”
The group said it will usually update a person’s tax code based on the information that they receive from their employer or their pension provider. If you are unsure what your tax code means, there is a tool on the Government website to help you understand what the different numbers and letters mean.
The most common tax code is 1257L. This indicates that you are entitled to the full personal allowance on your income. Those with the full allowance can earn up to £12,570 a year without paying income tax on this amount.
One way you could end up paying the wrong amount of tax is if you are put on an emergency tax code. This can happen if you have started a new job but your new employer does not have the details of your previous income.
Guidance on the gov.uk website explains: “If your new employer does not have your previous income and tax details, you’ll be paid using an emergency tax code. This is usually temporary.
“Usually, your tax is worked out based on your total income so far in that tax year. If you’re on an emergency tax code your tax is worked out based on what you’re paid in that week or month only.
“You get taxed as if you’re paid that amount every week or month of the year. This could mean you pay the wrong amount of tax.”
Emergency tax codes can end in either ‘W1’ if you are paid weekly, in ‘M1’ if you are paid monthly, or in ‘X’ if your pay date varies. You may also see NONCUM on your payslip.
To avoid this or if you find yourself in this situation, you should give your P45 from your previous job to your new employer, as this will have the details about your previous tax situation. If you were not given one, you can ask your old employer to issue you one.
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