Finance

How to check If You Are Paying Too Much Income Tax

Income Tax

There are many citizens who are spending a big chunk of their income as tax. Are you among them? This article will explain how would you check and challenge the tax code. It seems like the tax code is a random assortment of numbers and letters, but it easily could be costing hundred pounds per year. If you have been allocated a wrong tax code, then chances are that you are paying the tax more than you need.

Here is how you can check if you are on the proper tax code and also get that changed if you are not.

What is the Tax Code?

Anyone who’s employed, full time or on a part time basis, or gets a private pension has been assigned the tax code. The tax code will tell the employer or the pension providers about the amount of tax needed to be subtracted from the gross salary before payment. If you have been assigned a wrong tax code you are probably paying hundreds, possibly thousand pounds extra.

Where Can You Find the Tax Code?

The tax code ought to be printed on the wage slips, if you are employed in more than a job, you might have separate tax codes. Mostly tax codes consist of one letter and 2/3 numbers like 647L, though few codes might just bear letters like BR.

Why the Tax Code Can Go Wrong?

There are situations resulting in assigning a wrong tax code, here the common grounds:

 – Changing the job 

If you’ve recently changed a job or waiting for the p45 from the previous employer, chances are that you could’ve been given a wrong code. It can also be so that the tax office is unaware that you’ve finished the previous job, thus they’ll consider the new one as the second source of tax, and income accordingly. You may be given an emergency tax code, until a tax code has been assigned accurately.

 – The State Benefits Do Change 

State benefits aren’t taxed; they take up Personal Allowance to affect the tax code. If the benefits change, the tax free earning entitlements are used to determine your tax code.

 – Your Company Benefits Change 

Certain benefits are considered as taxable. As you start receiving, or get a change in any benefits, it may affect the tax code. If any circumstance applies, then ensure you check the tax code. If you haven’t, it makes sense to confirm tax code.

How to Check if Your Tax Code is Right

A tax code usually is determined by factors like age, health benefits, employment and marital status. Mostly tax codes bear letters with numbers; the letters relate to the specific tax type and work you have been doing, while numbers indicate tax free allowance each year. Check both letters as well as numbers when you check the codes, as both affect the amount of tax you are paying.

Personal Allowance

Once you have checked that you have the right tax code, you have to calculate the Personal allowance, which is the money you earn every year before you are taxed.

How to Recover the Tax

If you think that you’re on the wrong code, then you must contact the tax office and ask for the tax assessment.

If you have been overpaying tax, you can claim the rebate. Any local tax office can tell you which documents are needed to process the rebate; it usually includes the P60. HMRC may check previous year’s contributions during the assessment, again if you believe you owe money further, you may claim about 6 years over payments.

Get Expert Advice 

There is less doubt about the tax could be complicated and indeed frustrating. If you are struggling, there are places you may turn for help:

Tax Aid helps people resolve tax issues, if you’re retired T.O.P there are independent tax services for the older generation.

Be aware: There are companies which give the offer to submit tax rebate, however though you will not have to chase the HMRC. You need to pay the fee which may be avoided on directly contacting HMRC.

Similarly, if you aren’t paying enough taxes, the tax office has to be informed! You will require a tax reference, national insurance number, both are available on the pay slip.

By – Ruby Andrew

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