It’s true.
Finance experts at Work Life have highlighted that thousands of UK employees could be due a tax refund, with the average reclaim sitting at over £1,500. That’s a lot of money!
But, the catch is that you need to claim it yourself. HMRC won’t action this unless you ask.
So, let’s get into the tax codes.
What is a tax code and why is it important?
Your tax code is the thing that tells your employer how much tax to deduct from your pay. Think of it as the sat-nav for your income tax journey: if it’s wrong, you could be driving in completely the wrong direction financially.
The most common tax code for the 2024/25 tax year is 1257L. This code means you’re entitled to the full Personal Allowance of £12,570. This is the amount you earn before you start paying income tax.
But, if you’ve started a new job and didn’t hand in your P45, or if you’re working more than one job or pension, you tax code could be incorrect. And that’s where overpayments creep in.
How do I check my tax code?
Start by looking at your most recent pay slip. You should see a code (i.e. 1257L) somewhere near the top.
If you’re not sure what it means or whether it’s right, don’t panic.
Head over to the GOV.UK website and use the ‘Check your Income Tax for the current year’ tool. It’s free, easy to use, and gives you a breakdown of your tax code, what it means, and whether HMRC has made any recent changes to it.
Note: if you’re self-employed and only pay tax through Self Assessment, this tool unfortunately won’t apply to you.
What do the numbers and letters mean?
Let’s break it down:
The numbers
The numbers in your tax code (like the 1257 in 1257L) show how much of your income is tax-free.
Multiply that number by 10 and you get your Personal Allowance: £12,570 in this case.
The letters
The letters tell HMRC a bit more about the situation:
L: you’re getting the standard Personal Allowance
M: You’re receiving part of your partner’s Personal Allowance
N: You’ve transferred part of your allowance to your partner
S: You live in Scotland
BR/SBR: You have a second job or pension
T: There are some items HMRC needs to review
W1/M1/XL: These are emergency tax codes and usually show up if HMRC doesn’t have enough information yet
K: You have income that isn’t being taxed in another way (think company benefits or unpaid tax from a previous year)
What should I do if it’s wrong?
Don’t ignore it. If something doesn’t look right, get in touch with HMRC.
You can go this online, by phone, or via your personal tax account.
It’s a good idea to keep hold of your P45s, pay slips, and any letters from HMRC. They’ll come in handy if you need to sort things out.
Why does this matter?
It’s your money. If you’re due a refund, that could be a holiday, a family weekend away, a chunk towards your rent or mortgage payment, an energy bill sorted, or even something to put towards this year’s Christmas shopping.
So, next time you’re having a life admin day, take five minutes to check your tax code. It might just pay off… literally!
As always, make sure to get in touch with us if you have any questions, or you’re unsure of where to start.
You can call us on 01872 267 267, email us contact@whyfield.co.uk, or message us on WhatsApp 0777 49 39 111.
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