Because if so, I want to you to do something: go and check your tax code. Most of my blog posts are aimed at business owners, but I realise that not everyone falls into this category – in fact, most people are more likely to be employed than self-employed. So, no need for an accountant then? Probably not, but ask yourself how well you understand income tax and particularly the ins and outs of PAYE. I’ve already given my number one tip (see https://www.ghbk.co.uk/bookkeeping/feast-or-famine/ ) for business owners, but here’s my number one tip for the employed: make sure you understand your tax code.
Personally, I think all teenagers should be taught about PAYE before they leave school so that when they get their first job they know exactly what should be happening with their wages. Everyone should know that before they can be paid a penny by their employer they must provide either a P45 or a completed P46 (now known as Starter Checklist). Everyone should know what their tax code is and what it means. They should also know how to check their P60 at the end of the year.
The first thing you need to know is each person has a Personal Allowance – an amount of money they are allowed to earn before they have to pay tax. This tends to change each tax year but this year it is £11,500. This forms the basis of the default tax code: 1150L – have a look at your payslip and find your tax code. If it is something different, you should have received a coding notice from HMRC explaining why. You have the right to know why, so if you haven’t received an explanation, you need to contact HMRC and find out (call the Income Tax helpline on 0300 200 3300 or check your online tax account).
Why do this? Simply because sometimes HMRC get it wrong. It’s not always their fault but the fact remains, if your tax code is wrong you could be paying far too much tax without ever realising. A couple of years ago I had a client who had two jobs and was paying too much tax because of the way his tax codes worked. Luckily, I spotted it and was able to talk to HMRC and arrange for a refund and for the tax codes to be corrected so that it didn’t happen again.
Don’t let this happen to you – check your tax code!