CHECK YOUR TAX CODE

You may be charged too much tax from April unless you act now.

HM Revenue & Customs is sending out 25 million tax codes but a large number of them are wrong. They tell employers and pension providers how much tax to deduct from our pay or pension. A copy headed ‘PAYE Coding Notice’ is sent to taxpayers and they are now dropping through our letter boxes.

Every year we are all allowed a certain amount of income before tax is paid. And our ‘tax code’ tells the employer or pension provider how much that is so the rest can be taxed correctly. This year the Revenue has moved all our records onto a new computer system. And it has got things wrong.

First, old jobs and other sources of income have not been properly closed down. So if you have changed jobs, had temporary employment, or retired in the last few years you may get a tax code for these old sources of income as well as your current ones.

Second, the new system divides your tax free allowance up among all your sources of income. So some of it may be allocated to an employer you no longer work for. That leaves less for the sources of income you actually have. If that happens you will end up paying too much tax on your income.

• If you have got more than one PAYE Tax Coding notice and any of them refers to a source of income you no longer have then all your notices are probably wrong.
• If you are under 65 and don’t get a state pension and your Code is not 647L then it should be checked to find out why.
• If you get a state pension it will be deducted from your tax allowance. Make sure the annual amount of your state pension is correct – you should soon get a letter from the DWP telling you what you will get each week in 2010/11.
• If you were born before 6 April 1946 make sure you have been allocated the higher tax allowance for people aged 65 or more this tax year - £9,490 or £9,640.
• Look at the arithmetic and see if it makes sense. If you don’t understand it then it may be wrong.

Call the Revenue on 0845 302 1443 to get your tax code checked. You may have to be patient as hundreds of thousands – possibly millions – of Coding Notices are wrong.

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