We often find that people struggling to balance a budget are paying too much tax because they haven’t checked their tax code.
Everyone who is employed has a tax code. If you’ve started work for the first time, or you’ve changed jobs and your employer hasn’t got your P45 yet, you might have the wrong tax code and you could be paying too much tax.
You can find your tax code on your P45, a P60 from your employer at the end of each tax year, a payslip or a coding notice from the tax office (HMRC).
Your tax code is made up of a mix of numbers and a letter. The current basic tax code for most working age people with one job is 1150L.
The numbers tell you how much you can earn before you pay tax – just add a zero to work it out. If your code is 1150L you won’t pay tax on £11,500 in this tax year. The letter indicates you’re entitled to this personal allowance.
Here’s a simple example for 2017-18 tax year for tax code 1150L
- You earn £15,000 a year
- You pay no tax on £11,500
- You pay 20% tax on the remaining £3,500 – a total of £700 tax for the year.
So don’t throw your hard earned money away – check your tax code. There’s a great, easy to use and free tax code calculator here.
If you think you’ve overpaid tax, call HMRC on 0300 200 3300 or fill in a form online by clicking here.