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How To Change Your UK Tax Code

How To Change Your Tax Code UK

Need to know how to change your tax code? You can change your tax code by requesting a change with HMRC by phone, online, or via your accountant. 

There are different options available for changing your tax code. Whether you choose to contact HMRC by phone directly at 0300 200 3300, or access your tax account online, you can still change your task code. Even your accountant can do that for you. Changing your tax code during the year means that you may be underpaid or overpaid, owing money or getting a refund from HMRC.

Your tax code is a code number provided for you by HMRC. It varies for different individuals depending on their income and changing financial circumstances. If you move to a new job that pays you more or leave your current job, it is necessary for you to change your tax code . Knowing how to change your tax code helps HMRC deduct the right tax amount from your income.

Read to know the steps needed to change your tax code in the UK.

What Is A Tax Code?

A tax code is a reference number that is made up of letters and numbers. It is assigned to you by HMRC and is used to calculate your due taxes. When you receive your income, your employer or your pension provider deducts the income tax. You can find your tax code on the front page of your payslip which implies how much income tax will be taken from your salary.

For the tax year 2022/2023, the tax code currently used is 1257L. It is the same for most people who have one job or receive one pension. It has remained fixed since the 2021/2022 tax year. The first number stands for the personal tax-free allowance set by the government. This amount is not fixed; it can change or remain fixed for several years.

Self-employed people, landlords, and those who receive investment revenues and dividends are responsible to calculate the due taxes on their earnings to be paid for HMRC, and submit a self-assessment tax return each year, which is due by the 31st January following the end of the tax year that the income was received.

How To Check Your Tax Code?

Checking your tax code can be easily done through looking at documents you receive either from your employer or from HMRC, since it is used by both. These documents include the payslip, P60 or P45, which are issued by your employer. In addition, tax code notice letters sent by HMRC include the tax code as well. But you do not need these documents when you can access your personal tax account online. You can also get your tax code by calling HMRC on 0300 200 3300 on working days between 8:00 and 18:00. Self-employed people can find their tax code on their business accounts online, or on any document sent by HMRC.

Why Might You Need To Change Your Tax Code?

Your tax code is related to your earnings. It is used to calculate how much income you earn, tax relief on expenses, and any benefits you receive from the state or your employer. If any of these income sources change, your tax code should change too.

The change in tax code means a change in the deducted income tax. When you get a new job, go through a change in marital status, or receive increased benefits, updating your tax code with HMRC becomes a must. Although this code changes automatically as you notify HMRC of these changes, some errors may occur. You need then to contact HMRC and discuss the issue with them since such errors cause either overpayment or underpayment of tax amounts. So you may owe them unpaid tax, or they could owe you a refund.

How To Change Your Tax Code?

The change in your tax code will take place automatically. You will receive a letter or an email from HMRC with the updates. Do not forget to sign up to receive electronic communications so that you know when the changes are made.

If your tax code is not changed or is incorrect after it has been changed, then you need to contact HMRC directly. The change in tax code can happen on the phone. HMRC will give you the needed advice on what action should be taken.

Your accountant is also allowed to change your tax code. If you have any questions, they can be your best advisors on how to proceed. Your tax code accuracy guarantees fair payment of taxes.

Changing Your Tax Code Online

The HMRC website enables you to change your tax code online. To do so, you should have a personal tax account at www.gov.uk/personal-tax-account . If you do not have one, you can set up an account. Following the onscreen instructions, you can change your tax code. your National Insurance Number, information about your current job and sources of income should be available with you to fill in some necessary information.

Changing Your Tax Code By Phone

If you prefer to speak directly to HMRC, you can give them a call on working days between 08:00 and 18:00. The same information required for online access should be provided on the phone. HMRC can be reached on the phone number is 0300 200 3300.

Changing Your Tax Code Via Accountant Or Tax Advisor

Your accountant or tax advisor should already have the information needed to change your tax code with HMRC on your behalf, but if this is the first time you’ve asked them to talk to HMRC on your behalf, you will need to authorise this first by following the steps to ‘authorise an agent to handle your tax affairs’ on HMRC’s website.

It is also possible to have a “trusted helper”. Just ask a friend or a family member to register to manage your tax online.

What Do The Letters In My Tax Code Mean?

Different letters and numbers in the tax code stand for different individual circumstances that affect tax allowance. In the table below, you can find what the letters mean and when they are used. When taxpayers reside in Scotland or Wales, the initial letters of the tax code change. The codes start with S for Scotland and C for Wales.

CodeHow Tax Is DeductedWhen Code Is Used
OTFrom all income, no personal allowanceNo P45 is given to employer or when personal allowance has been used up
BRFrom all income at basic rateFor a second job or pension
DOFrom all income at the higher rateFor a second job or pension
D1From all income at the additional rateFor a second job or pension
LAt basic, higher, and additional rates depending on amount of taxable incomeWhen standard tax free personal allowance applies
MAt basic, higher, and additional rates depending on amount of taxable incomeWhensomeone’s spouse or civil partner has transferred some personal allowance to them
NAt basic, higher, and additional rates depending on amount of taxable incomeWhen someone transfers some of their personal allowance to their spouse or civil partner
NTNo tax deductedIn rare circumstances
W1 or M1Emergency taxWhen changes of income occur and tax code hasn’t been updated with HMRC in time
KWhen deductions for company benefits, state pension or tax owed from previous years are greater than personal allowance

What Is Emergency Tax?

When the right tax code is not ready, Emergency tax is utilised by HMRC. This temporary income tax has a special tax code that is used in different circumstances like starting a new job, or moving from being self-employed to being an employee. It is also applied when major changes in wages take place, and when individuals start receiving benefits and pensions from states or companies.

The emergency tax is used until the employer sends HMRC the notification of earnings and the appropriate adjusted tax code.

The following codes on your payslip indicate that you are paying an emergency tax on all income that exceeds your basic personal allowance during a tax year.

  • 1257 W1
  • 1257 M1
  • 1257 X

HMRC uses emergency task codes in order to avoid or minimise tax losses. When you get the correct tax code on your updated account, you will be notified of the under or overpayment for HMRC.

Why Is Income Tax Collected?

Income tax is a source of funding for public services provided by the UK government to citizens. It funds healthcare, education, defence and infrastructure. This kind of tax also supports the UK’s international aid commitment to other countries, funding public services in different parts of the world.

Your income tax plays an essential role in covering essential service costs like roads, hospitals, schools, and police forces. Paying your taxes means that you are supporting national initiatives such as the National Health Service (NHS), as well as welfare benefits. You are even contributing to research and development.

The amount of income tax paid increases with the salary increase. Let’s say you earn between £12,751 and £50,270 per year, then you pay 20% as income tax. Those who earn between £50,271 and £150,000, will have 40% deducted from their income as a tax. When annual earnings become £150,000, the rate of income tax increases to 45% annually. Therefore, the income tax in the UK follows a progressive tax system.

Who Needs A Tax Code?

All people who have an income in the UK need their tax code to pay their taxes properly. Income tax is calculated on all sources of income from self-employment to receiving benefits and pensions.

Your personal allowance is determined by the government on an annual basis. Therefore, you know how much you can earn before having to pay a tax. Having no tax code could lead to paying more taxes later on.

What Should Your Tax Code Be?

You will find your tax code on the payslip Based on your personal allowance for the tax year,

If your annual income is less than £12570 for the year 2022/2023, you are not entitled to pay any income taxes on your earnings. When your total income increases above £12570 from different sources, then you need to adjust your tax code.

The self-assessment tax service is used by self-employed individuals. Using the self-assessment service on the HMRC website allows you to check your tax code and manage your taxes online, ensuring that everything is on the right track.

If you doubt that you are put on emergency tax by mistake, or that are errors in calculating your income tax, make sure that you contact HMRC promptly to resolve any issues and ensure you are paying the right tax amount.

Summary

As a taxpayer who resides in the UK, you have to know that your tax code can change due to various circumstances, such as an income increase or a job change. Your tax payments are determined by your tax code, so it is essential to check your tax code regularly to make sure it is correct and updated. Incorrect codes can cause under or overpayment of taxes, so contacting the HMRC in this case is necessary to get things fixed.

This article has outlined for you the steps you can follow to change your tax code, using different ways such as the phone, the website, or via an authorised agent, such as an accountant, a friend or a family member who you assign to act on your behalf. Accountants and tax advisors can give you more detailed advice, and provide you with information to better understand your personal situation.

It is important to check your code regularly to ensure that it is accurate and up-to-date. If the incorrect code has been used, HMRC will issue a notification of underpayment or overpayment and will adjust your code accordingly.

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