Are You Paying Too Much Tax?
If you depending solely on free online tax advice, you should know that it is not always the best idea and most accurate information. It is much better to call upon the knowledge of a financial advisor. Although even the very best financial means nothing if you don’t have the funds to invest.
The great news is that a financial windfall in the shape of a tax refund may soon boost your investment funds.
Money Saving Expert Martin Lewis says that most people never check whether they have been given the correct tax code, which could mean they’ve been paying too much tax.
The moneysavingexpert website claims that a lot of individuals get the wrong tax code each year. The site has created a guide to help people check their tax code, and explains what they can do if they paid too much (or too little) taxes.
I Think I Have Paid Too Much Tax
Everyone who works full or part-time, as well as those who receive a private pension, should have a tax code. Unemployed people or those who only receive a state pension won’t have a tax code.
Your employer uses this code to calculate your tax deduction from your wages. If the wrong code is used, it will likely result in incorrect deductions.
The code will be on your P45 or P60 forms, your wageslip and the coding notice you receive from HMRC each March. If you don’t have any of these, you can contact HMRC direct to get it. It tends to a string of numbers and letters, e.g. K497.
Checking Your Tax Code
To use the website’s tax code calculator, first you need to calculate your personal allowance – i.e. the amount you’re allowed to earn before you have to pay tax. You’ll also need to check if you have any deductions, such as medical insurance.
Next, you need to subtract the deductions from your personal allowance to find the amount of income you‘re allowed to earn before paying taxes. Now remove a zero from the end of that number and you have the first part of your tax code. The next stage is to put that into the tax calculator.
My Tax Code Is Wrong
Your tax code may be wrong if:
- you are studying
- work part-time
- recently changed jobs
- there was a change in your state benefits
- you recently started working two jobs
- there was a change in your company benefits
If you find you have paid too much tax, you need to contact HMRC online or by phone. If they accept that you have overpaid tax and it was in past years, you’ll be sent a cheque in the post. If it has happened during the current year, your employer can fix the problem by reducing your tax deductions.
People who haven’t paid enough tax can try challenging this with an A19 or Extra Statutory Concession. However it is most likely that the application will fail and they will have to pay the tax arrears. If they’re lucky HMRC may allow a payment plan.
Once you have the correct code, the initial problem will be resolved. But if your circumstances change you may need a new code. For example, if you move jobs or get a salary increase, it would be worthwhile to check the code again.
If the whole thing looks a bit too mind-boggling, you should call in the services of a personal financial consultant click here.