BUSINESS
Talking Tax Codes A
question - do you know what your tax code is? It may surprise you to learn that even some highly paid, well educated, city professionals couldn’t answer that question when I asked them recently. So why is it important? After all, if you are in employment and any tax due is being taken from your wages, it should all be straightfor- ward - shouldn’t it?
But tax codes hit the
headlines last year with 1.4million taxpayers - they had paid too much. With the new tax year looming, now is the time to check that your tax code is right and you are paying the right amount of tax, at the right time.
A tax code is issued by the Inland Revenue to your employer so that they can collect tax from your earnings of any kind, salaries, wag- es, pensions etcetera, but also allow each in- dividual a certain tax-free amount. The basic tax code in the current year for a person under 65 with only one job and no other income/allowances would be 747L – i.e. you can earn £7,475 during the tax year which is not taxed – about £623 per month. If you
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have two jobs, or other earned income such can then be reduced to make sure any addi- tional tax due is deducted throughout the year. That means that you shouldn’t suddenly face a tax liability at a later date. The code can also be increased to take account of other “allow- ances,” i.e. professional subscriptions. However, if the code is wrong because the Revenue do not have the right information then the tax being taken from your wages will not be right either.
The Revenue issue you with a notice each year telling you what code they have given to your employer, or employers. That notice explains how the code is calculated, but it is up to you to read this and, if it is incorrect, do something about it. You are better off being in control of your affairs, than just hoping that someone else will get it right for you. After all, you are the one who ends up paying.
If you are not sure what your code means, if you think it is incorrect, or your situation has changed recently and you are not sure what to do about it, then get in touch with
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