Your tax code is what determines the tax that is deducted from your salary before it is paid to you. It is what employers use to pay you your salary and the code is issued to your employer from HMRC.
Your employer cannot change your tax code and they are not told by HMRC as to why your tax code may change or the make up of your tax code. HMRC changes your tax code based on information they receive from your employer, third parties and your tax return that you may have completed.
Your annual personal allowance is £12,570. This is the starting point of all tax codes. Amounts are them added on where you have allowable deductions to allow more tax free amount to you, or deducted where you may have to pay tax to HMRC.
What to do if your tax code changes
If your tax code changes, you should log onto your personal tax account and there should be a notification from HMRC that details the changes that have been made to your tax code to make the change.
Go through each of these changes to ensure you understand why the change has taken place and to ensure the amounts are correct. HMRC have been known to make errors and so you should always check these are correct.
Ensure you do not have any estimated amounts included in your tax code as these are HMRC’s way of making assumptions and getting tax early from you. You do not have to keep the estimated amounts on your tax code change.
What if you have estimated amounts
If you have estimated amounts on your tax code, you should contact HMRC by phone or webchat and request that these amounts are removed from your tax code. That way you are not pay tax on an unknown amount.
It is advisable to always understand your tax code and this determines what your tax free allowance is for the year.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website: www.champconsultants.co.uk
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