Martin Lewis has issued a warning urging employees to check that their tax details are correct. The consumer expert highlighted that paying the wrong amount of tax is possible if personal information is not up to date.
Tax code warning on BBC podcast
During his BBC podcast, Mr Lewis was asked about tax bands by an NHS worker. In his response, he shared a cautionary note that applies to millions of people across the UK.
The money saving expert said: "The one big thing that we do need to be careful of, and which everyone who is an employee needs to be careful of is, is your tax code correct."
How tax codes work
Mr Lewis explained how tax codes function. He said: "You'll get a tax code, normally it will be four numbers and a letter. So the standard one is 1257L. What that means is add a zero, to the number, so 1257 becomes 12,570, that is telling you what your tax-free personal allowance is, the amount you can earn before tax."
Each person receives a standard personal allowance of £12,570 per year, meaning earnings up to this amount are not subject to income tax.
Complexities and common mistakes
Mr Lewis pointed out that tax codes can change depending on employment perks. The letter in the code adds complexity, with 'L' being the simplest, indicating entitlement to the full personal allowance.
He advised: "There are tax code calculators online that can decipher your tax code for you, and then hopefully help you work out whether you're roughly in the right tax code or not. That is worth checking, especially if you've got a second job. That's where the mistakes can happen."
How to check your tax code
Your tax code can be found on your payslip, the HMRC app, or your personal tax account on the Government website. It is your personal responsibility to ensure the code is correct, not your employer's.
If your tax code is wrong, you may need to update your details with HMRC. This can be done through your personal tax account or by calling HMRC on 0300 200 3300, Monday to Friday from 8am to 6pm.
