Need to know
HMRC has explained how tax codes work after a confused taxpayer questioned a refund followed by a tax code change
HMRC has clarified its tax rules(Image: Getty)
HMRC has offered clarification on one of its taxation regulations after it emerged that individuals might pay a different sum in tax than their documentation suggests. The matter came to light following correspondence from a worried taxpayer who suspected they had paid an erroneous tax amount.
- Writing on social media, the person said they were puzzled after obtaining a tax refund, only for their tax code to be modified because “you [ HMRC ] predicted I won’t be paying enough tax for this year”. HMRC responded, enquiring whether the reimbursement they had obtained related to a previous tax year or the current one. The individual confirmed it concerned a previous tax year. They restated their bewilderment, declaring they “don’t understand how I can overpay/underpay”.
- HMRC responded by explaining what might have occurred. It explained: “In general, something has happened during the tax year that wasn’t accounted for in the tax code.”
- The tax authority emphasised another crucial principle regarding tax codes. The organisation said: “Remember tax codes are based on a prediction of what taxable income you’ll get, so are only ever an estimate.”, reports the Mirror.
- Your tax code establishes how much is withheld from your employment wages or pension payments. You can find your current tax code on a recent payslip.
- Alternatively, you can verify it through your personal tax account on the Government website or via the HMRC app. An advantage of reviewing your tax account or using the HMRC app is that you can also uncover your tax codes from previous tax years.
- Via these platforms, you can additionally sign up for paperless communications, ensuring HMRC will contact you by email should your tax code be modified.
- HMRC can adjust your tax code if your income or other situations change. For example, if you start a new position or begin receiving taxable benefits, your tax code may be updated. You might also see your tax code change if your weekly state pension sum increases. HMRC may also amend your tax code if you were previously assigned an incorrect tax code and you owe a sum.
