Consumers urged to check tax codes are correctApril pay slips could reveal mistakes

15 April 2010

Tax basics

If you're self employed, you'll need to fill in a tax return

Consumers are being urged to check that the income payments they receive in April are correct, after concerns that HM Revenue and Customs’ computer system may have issued incorrect tax codes to some people at the start of 2010.

The Low Incomes Tax Reform Group (LITRG) points out that although the potential problems with coding notices were highlighted in January and February, people may only realise they are being taxed incorrectly now the new financial year has begun.

Pensioners are especially likely to have complicated tax affairs compared with those in full-time employment, as they may have income from multiple pension funds, savings accounts and investments as well as some earnings from employment. This can result in complex tax codes which are easy to misunderstand and make mistakes harder to notice.

Check your tax code

LITRG suggests consumers should look at any tax coding notices they have received to check that the code issued is the same as the one printed on the April pay slip they receive from their employer or pension provider.

If no tax coding notice has been issued, LITRG recommends telephoning HM Revenue and Customs to ask for one.

If no pay slips are available, LITRG recommends that people check their bank statements to ensure there is no unexpected or substantial change in income this month. If there is a noticeable change, this could indicate there has been an error – in which case HMRC should be contacted.

Wrong tax codes

Identifying your tax code as incorrect may not be easy – particularly if you don’t already have an idea of what your correct code should look like.

However, the tax codes ‘BR’ and ‘DO’ should ring alarm bells with most people; tax code ‘BR’ indicates you will be taxed at 20% on all income (with no personal allowance deducted first), while ‘DO’ indicates you will be taxed at 40% on all your income.

For help with understanding what your tax code should look like – and spotting any mistakes that may have been made - read the Which? Tax codes explained advice guide.

Our Tax rates, allowances and amounts guide provides more information on how much tax you should expect to pay each year, while the Tax appeals, disputes and complaints guide could help you resolve tax problems.

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