MARTIN Lewis has issued a warning over a simple mistake that could cost you thousands.
The consumer champion was talking on ITV's This Morning yesterday (December 13).
He said it was the British public's "legal responsibility" to make sure their tax code is correct as they could owe thousands to HM Revenue and Customers (HMRC).
It came after a man reached out to him on the episode after being informed he has to pay around £5,000 to HMRC.
Presenter Alison Hammond read out a question from Richard, a member of the public, who shared he has been on the wrong tax code for the last four years.
He went on to say he now owes £5,000 that he has underpaid and asked Mr Lewis what he should do next.
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Mr Lewis responded: "It is your legal responsibility to check the tax code is right and millions of them aren't right. It's not your employer's. It's not HMRC's.
“If it's wrong, you can find out you've underpaid and get a big bill.
"If it's right, you're paying too much and you might be entitled to money back.
“There are some good calculators online where you can check your tax code is right but never assume it's right because millions of them are wrong.”
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Mr Lewis went on to explain that the likelihood was that Richard would have to pay the £5,000 he underpaid in tax back.
He said: "You should be given time to pay. You should be able to do a payment plan with HMRC.
"But there is little wriggle room on this.
"If you can afford to go to an accountant to look at it, if you think it's wrong, do so.
"There are also some tax help charities out there that may be able to give you some guidance on this.
What is a tax code?
Your tax code is the code used to figure out how much of your pay packet should be deducted and given to HMRC.
It's made up of several numbers and a letter.
Currently, 1257L is the code used for most people who have one job or pension.
But there are lots of different codes you can be given which all reflect your work or pension situation and how much money will be taken from you.
The numbers tell your employer or pension provider how much tax-free income you get in that tax year.
Most Brits have the above tax code because of the current personal allowance of £12,570, which is the income you're not taxed on.
How do I find my tax code and how can I change it?
You can find your tax code in a number of different ways, including:
- on a "Tax Code Notice" letter from HMRC if you get one
- on your payslip (this might be online or in paper form)
- on the HMRC app
- by checking your tax code for the current year online on your personal tax account
HMRC should, normally, update your tax code when your income changes.
They should receive this information from your employer.
But sometimes HMRC might not have the correct information and you may be given the wrong tax code.
Of course, HMRC won't know if you have the wrong tax code so will continue deducting what it thinks is the correct amount from your pay.
So it's up to you to be proactive and get in touch with them if you think it's wrong.
As Martin said, you can use tools to check whether yours is incorrect, such as this one on the government's website.
You can use the tool to update your employment details and tell HMRC about any change in income that might have affected your tax code.
If you have paid too much or too little tax, HMRC will send you either a tax calculation letter, also known as a P800, or a Simple Assessment letter.
If your P800 letter says you're due a refund, it will tell you how to claim it.
You might be able to request the refund online, but you'll need your Government Gateway user ID and password.
You can create one if you don't have one, but you'll need your National Insurance (NI) number and two of the following to hand:
- a valid UK passport
- a driving licence issued by the DVLA (or DVA in Northern Ireland)
- a payslip from the last three months or a P60 from your employer for the last tax year
- details of your tax credit claim
- details from your Self Assessment tax return (in the last two years)
- information held on your credit record if you have one (such as loans, credit cards or mortgages)
You'll receive a Simple Assessment letter if you owe income tax that can't be automatically taken out of your income, you owe HMRC £3,000 or more or you have to pay tax on the state pension.
If you think the calculation on the letter is wrong, you should call or write to HMRC within 60 days.
You can call on 0300 200 3300 or send a letter to Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.
If HMRC agrees your Simple Assessment was wrong, you'll be sent the correct one.
If they disagree, you'll get a letter explaining why, how to pay and how to appeal if you still think it's wrong.
You can appeal, but you have to do it within 30 days of receiving your initial decision letter.
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But you'll need to specify which amounts you think are incorrect and what they should be.
In other news, we explain how much National Insurance you pay.
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