Workers have been told to look out for a key letter on their payslips - or risk losing out on hundreds of pounds. Millions of UK adults receive a paper or online document every month which details how much they have been paid plus any deductions such as income tax, National Insurance and pension payments. Many don’t bother to look at them and just enjoy the money reaching their bank account towards the end of the month.
But financial experts have highlighted that it’s a personal responsibility to check you’re paying the right amount of income tax - and revealed a simple step to spot if you’re missing out. Jack Mackreth, of leading accountancy firm Kyzen Sports, said: “Tax codes can be wrong for a whole host of reasons. Maybe you’ve moved jobs and some of the paperwork wasn’t completed or sent across.
“But what many people don’t realise is that it’s your responsibility to check your own code is correct, not your employer or HMRC. So if you are ignoring these emails or not opening the envelopes containing your monthly pay slips, you might go on for months or even years over- or under-paying.”
Jack revealed the letter you need to look out for on your tax code is ‘L’, which means you are entitled to the standard tax-free account. He added: “The current code is ‘1257L’ but the numbers can change depending on what the Treasury decides.
“However, it will always have an ‘L’ on the end so that’s the letter you need to be looking out for. This applies to most people, but there are a host of different tax codes and having an understanding of them should stand you in good stead for keeping an eye on your pay slip in future.
“For example, ‘BR’ is the basic rate code and generally applies if you have a second job. An ‘M’ signifies that you are receiving 10 per cent of your partner’s allowance through the Marriage Allowance scheme, while an ‘N’ at the end of your tax code means you are donating 10 per cent of your own.
“Meanwhile, the ‘D0’ code indicates all of the income or pension from that particular role is being taxed at the higher rate - generally because you’ve got more than one.”
According to the www.gov.uk website, the standard personal alliance is £12,570 - the amount you don’t pay tax on. Anything you earn between £12,571 and £50,270 is taxed at 20 per cent, while £50,271 to £150,000 is the higher rate of 40 per cent.
For the bigger earners, income above £150,000 is subjected to a 45 per cent levy. If you think you’ve paid too much tax, you should contact HMRC about getting a rebate. As well as wages, this applies to expenses and redundancy payments. Jack said: “There are occasions when HMRC realises it has taken the incorrect amount of tax and will get in touch.
“You will either get a P800, or tax calculation letter, or details of how to apply to rectify the issues. With the new financial year starting in April, these documents are normally sent out between June and November of the same year.”
