Making sure you're on the right tax code will help you avoid losing too much of your hard-earned money
Tax is a part of life and we all pay it in one form or another, but have you ever considered that you might not be paying the right amount of tax? The amount of income tax you pay on salaried income and pension income is dictated by a tax code HM Revenue and Customs (HMRC) gives to your employer or pension provider. Most of us assume that code is correct, but HMRC do make mistakes and you could be paying too much or too little tax as a result.
One area where mistakes are more likely is pension income, because people may have more than one pension or a pension and a wage, and it's more complex to get the tax right when there are multiple sources of income. The Decoding your tax code guide from Royal London estimates that up to 800,000 people, who are under state pension age but receiving private pension income, could be paying too much tax due to errors in their tax code.
“Employers and pension providers are issued with tax codes by HMRC and we generally assume they must be right,” says Steve Webb, Royal London Director of Policy. “But HMRC can get things wrong. I have no doubt that there are many people paying the wrong amount of tax.”
Most of us assume that code is correct, but HMRC do make mistakes and you could be paying too much or too little tax as a result
Find out more
Learn more about income tax, and whether you're paying the right amount, by visiting GOV.UK. If you think there's a problem with your tax code then you should report it to HMRC by calling 0300 200 3300 or visiting the website. HMRC allows you to claim overpaid tax going back four years.
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