Tax code

Worker warns Brits to check tax code after losing £9,000 in overpayments he can’t recover | Personal finance | Finance

Reddit user “Scoggy” shared their story earlier this year on the personal finance forum, where Britons can ask questions and discuss their financial situation. Scoggy only realized they had paid thousands of dollars in income tax when they finally checked their tax code.

They summed up their problem: “I have simple PAYE tax cases and I feel very stupid for not paying attention to my tax code.

“I changed jobs in December 2009. In my old job, I had private medical insurance, and not in my current job.

“This month I discovered by chance that my tax code included medical insurance of £918 for each year since 10/09. I was gutted as it means I overpaid in tax during 12 years.

They reported the mistake to HMRC and were able to receive a £1,800 refund.

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However, that is a pittance compared to the tax they overpaid, which is said to amount to just over £11,000.

HMRC reportedly told Scoggy that the system used did not go back far enough to provide a larger refund.

Scoggy concluded: “Moral that I think everyone but me already knew: check your tax code!

Tax codes are assigned by HMRC and used by employers or pension providers to determine how much people owe in income tax.

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Brits can check their tax code online in their personal tax account which will show them their current tax code, previous tax year code and next tax year code.

1257L is currently the most commonly used tax code for Brits who only have one job or one pension.

This number indicates the non-taxable allowance, which for many is the general personal allowance currently at £12,570.

People who think their tax code is wrong should contact HMRC, particularly if there has been a change in their income which would affect their tax.

The personal allowance threshold for income tax will be frozen until 2026.

Once workers’ earnings exceed the Personal Allowance threshold, they are taxed at a rate of 20% on earnings between £12,571 and £50,270.

If their income increases even further, they will pay 40% income tax on income between £50,271 and £150,000.

Any income above this amount is taxed at the highest rate of 45%.