Tax codes are an important part of the UK's PAYE (Pay As You Earn) system. Starting with a number and ending with a letter, the numbers in your tax code help your employer establish the amount of tax-free income you are entitled to in a work year. It is your responsibility to inform HMRC of any changes in income that may have affected your tax code. If you believe your tax code is incorrect, contact HMRC, who will issue a revised tax code to your employer as needed. If you have had a previous job (or received a taxable state benefit), your former employer (or the DWP) must give you a P45 form to give to your new employer.
This is where you come into play and you need to review your tax code regularly, especially if you have a change in circumstances. We've created a helpful guide that outlines everything you need to know about updating your tax code according to any changes in your circumstances and how you should do it. You can change your tax code quickly and easily online by contacting HMRC and updating your employment details using the online income tax verification service. They allow employers to calculate the amount of taxes that must be deducted from your salary or pension before they reach your bank account, so your tax code must be correct. If you review your current year's tax code online, you'll need to sign in or create a personal tax account. As soon as you realize that an error occurred with your PAYE tax code, contact HMRC by email or phone (0300 200 3300).
This is not uncommon and HMRC will automatically change your tax code once you have provided your new employer with the correct details related to your previous income and pensions. Your employer or pension provider uses your tax code to determine how much income tax you should deduct from your salary or pension. Based on real-time PAYE (RTI) information, employers report payment and tax details to HMRC every time they pay you. They will also inform your employer so that your next payroll shows your new tax code and reflects any changes in the tax you have paid. Taxes are deducted each payday from your payment before you receive them, and by the end of the tax year, you should have paid the correct amount of taxes. It is important to keep track of any changes in income that may affect your tax code so that you can update it accordingly.