More than 5.6 million employees were issued the wrong tax code last year. This error has resulted in over £3 billion in tax being overpaid to HMRC. If you think you may be due a tax refund, you might find the process slow and frustrating. SMH experts are on hand to help you navigate tax code errors as efficiently as possible.
There are a handful of errors that are seen more commonly, if you have experienced any of these, there are simple actions you can take to correct your Tax details and claim a refund for overpaid tax.
Typical problems are most commonly attributed to HMRC making it’s best estimate of your income, this could be triggered by:
- Taxable benefits: Benefits such as a company car, healthcare or gym membership may no longer be received, but HMRC will be unaware of such changes.
- Additional income: HMRC will base their estimate of additional income on what an employee made the previous year, but the income, for example property letting, dividends, or freelance work, may be less or have ceased altogether. Without informing HMRC of these changes, they will be unaware of this change.
- Allowances: The tax code could suggest an incorrect level of income when it comes to the amount of available personal allowance.
- Allowable expenses: Deductions for subscriptions and professional fees will be based on what was previously claimed, yet these will invariably increase each year.
- Multiple employments: It is becoming increasingly common for individuals to have multiple income streams through jobs. You might find that, if a job only lasts a few months, this will likely lead to incorrect tax coding.
So, if you have noticed any tax code errors on your payslip, what should you do?
First, check your tax codes. The responsibility to report an incorrect tax code lies with the employee.
Correcting mistakes immediately avoids having to reclaim overpaid tax. This can mean a long wait, with HMRC providing a poor telephone service and often ignoring written requests:
- The fact that paper tax code notices are no longer routinely issued means that a bit more effort is required to check HMRC’s coding assumptions.
- Employees should update details on the HMRC app or their online personal tax account.
Once details are updated, HMRC will amend tax code errors and inform the employer within 15 working days. Unless changes are made towards the end of the tax year, any tax refund should automatically be made by the employer. The government’s guide to tax codes can be found here.
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