The HMRC has sent out emails telling some workers which one of 13 tax codes they will be on during the next financial year. The current tax year started on April 6, and HMRC is sending emails to taxpayers asking them to prepare for the change.
The emails are being sent to workers who have seen a change to their tax code, and need to check if it is correct for the new financial year. Being on the wrong tax code can cost a taxpayer thousands of pounds in overpaid tax, although the money can be reclaimed from HMRC. Your tax code is used by your employer or pension provider to work out how much income tax to take from your pay or pension. HM Revenue and Customs (HMRC) will tell them which code to use.
Tax codes are the numbers given by HMRC on a pay slip or tax documents.
According to research from Canada Life, nearly one in five UK adults have never checked their tax code and those who have checked it have only done so on average once every 16 months. Brits most commonly check for no specific reason (19%) or out of habit (17%), but others have done so due to a job change (12%) or having been on the wrong tax code before (8%).
Among all the 2,000 UK adults polled by Opinium for the research, with fieldwork conducted between March 19 and 22, 2024, less than half (42%) know that it is currently correct. Moreover, almost four in 10 (39%) don’t know what any of their tax code means, leaving them at a disadvantage in the first place.
John Chew, tax and estate planning specialist at Canada Life, said 1257L was the most commonly used tax code.
He said: "This is when you have one source of income, either through a job or pension, and means you can earn £12,570 a year (your personal allowance) before you start paying income tax.
"Understanding your tax code is vital to ensure you’re paying the right amount of income tax. Those who are not on the right code may find themselves out of pocket.
"If it’s wrong, you may end up contributing more or less than you’re supposed to. So, if you haven’t checked your tax code(s) recently, now is a good time."
The BR, D0, and D1 codes indicate that all income is taxed at basic, higher, or additional rates, respectively.
The K code shows that the individual has income exceeding their tax-free allowance, which is not being taxed in another way.
Alternatively, individuals can check their code through the HMRC app or online via the Government Gateway. If you do not already have one, creating an ID will be necessary.
Chew said a T code means that the individual's personal allowance includes other calculations, whereas 0T indicates that their allowance has been fully used up or they have started a new job.
Tax code L means you are entitled to the standard personal allowance, while the code M shows that they have received 10% of their partner's allowance through the Marriage Allowance.
Code N, on the other hand, signifies that 10% of the individual's allowance has been transferred to their partner.
He said: "This is when you have one source of income, either through a job or pension, and means you can earn £12,570 a year (your personal allowance) before you start paying income tax.
"Understanding your tax code is vital to ensure you’re paying the right amount of income tax. Those who are not on the right code may find themselves out of pocket.
"If it’s wrong, you may end up contributing more or less than you’re supposed to. So, if you haven’t checked your tax code(s) recently, now is a good time."
