Our earlier article mentioned Payslip and mentioned how to check payslips.
Financial expert Martin Lewis has once again mentioned that incorrect tax codes on wages can cost hundreds of pounds.
How to interpret the tax rate you should pay by tax code? Can the overpayment be refunded? This article will continue to decipher payslip information for you.
What is the tax code
A tax code usually determines the type of tax you owe and how much you pay.
Different employees in different situations may have various types of tax codes. It also makes sense why someone would accidentally overpay or underpay.
Your payslip will usually show a row of numbers and letters, which is a code developed by HMRC.
The number in the tax code is usually one-tenth of the amount you could earn without paying taxes, such as 1257L.
Special tax codes
The tax codes mentioned above are not identical, and you may see special cases in different situations.
Tax code starting with BR:
This means that your employer may not be using all personal information, so all income is charged basic income tax of 20%.
It’s also possible that you have two jobs and HMRC has split the allowance between the other income.
Tax codes without numbers or tax codes starting with D followed by numbers:
If you have more than one source of income, the primary income will take up the personal allowance.
Therefore, secondary income may be subject to income tax on all income.
Tax code starting with K
When you see a tax ID number that begins with a K, be extra careful about unpaid taxes.
You will need to explain to your employer and work out what you owe in order to resume normal subsequent tax payments.
You will usually receive an emergency tax code when your tax code does not match the circumstances.
The emergency code will default you to be entitled to the basic personal income tax exemption, but will not take into account any allowances or other deductions.
This means that you may pay excess tax in the short term, especially if you start a new job or start a second job.
Common emergency tax codes are: 1257L W1, 1257L M1, 1257L X.
What if the tax code is wrong?
Once you find that the tax code is wrong, please contact the sending department or HMRC as soon as possible.
Please provide all the important information when getting help so you can find the problem and fix the tax code to get the correct tax.
If you are our client please contact our accounting team for assistance.