Britons are being advised to conduct a crucial review to ensure they are accurately paying their taxes as the new tax year commences. The current tax year began on April 6 and will conclude on April 5, 2026. Leading up to this period, HMRC dispatched emails to taxpayers reminding them to prepare for the transition.
A key task for individuals in preparation is to verify their tax code. Tax codes consist of a combination of numbers and letters assigned by HMRC based on the individual’s income information provided by their employer or pension provider. This code determines the tax amount deducted from your income, and every PAYE earner has one.
Having an incorrect tax code can result in overpaying or underpaying taxes. In such cases, individuals may receive a tax refund or face an additional tax bill, depending on the duration of the incorrect tax code.
Contrary to common belief, it is the responsibility of the taxpayer, not the employer, to ensure the correctness of their tax code. Research conducted by Canada Life reveals that nearly one in five UK adults have never reviewed their tax code, with those who have done so checking it on average once every 16 months. Reasons for checking vary, including habit, job changes, or past experiences with incorrect tax codes.
Despite the importance of tax codes, less than half of the 2,000 UK adults surveyed are aware if their tax code is accurate. Lack of understanding about tax codes leaves many individuals at a disadvantage in managing their taxes effectively.
John Chew, a tax and estate planning specialist at Canada Life, emphasized the significance of understanding tax codes to ensure correct income tax payments. The most common tax code currently used is 1257L, granting a personal allowance of £12,570 annually before income tax is applicable.
Tax codes in Scotland start with an “S” and with a “C” in Wales, being different if one has multiple sources of income. To verify the accuracy of your tax code, it is essential to understand the significance of the numbers representing tax-free earnings and the letters indicating the taxpayer’s circumstances affecting the personal allowance.
Individuals can locate their tax code on their payslip, P45 (if recently leaving a job), or P60 (end of a tax year), and online on Gov.uk. If there are suspicions of an incorrect tax code, direct contact with HMRC is necessary.
For individuals seeking to maximize their savings and deals, the Money Saving Club newsletter offers the latest advice and deals on various topics like travel, property, personal finance, and more.