In reality this means over 4 million people could be due a rebate because their code was incorrect.
Add to this a further 1.4 million people who did not pay enough tax and the government have a huge problem facing them.
Getting the correct tax code allows the employer and the HMRC to calculate the right amount of tax that should be deducted from salary or pensions. Small errors made by having the wrong code can lead to mistakes of hundreds or even thousands of pounds.
Employers Need To Help
A new computer system was installed across UK tax offices in 2009 which began to highlight that many people had been paying the wrong tax, some for a number of years. Another contributing factor was that employers were not being diligent with documents when staff changed jobs. This incorrect data entered into the system, further corrupting it. The HMRC now has the task of trying to clean the database.
A tax code consists of two main parts, and many things can change the code. For example; working for multiple employers, or working and also drawing a pension should mean that more than one code is be applied.
Circumstances That Affect Tax Codes
- Not fitting the average working mould
- Having multiple jobs
- Never worked but about to start
- Several years break from work
- Living outside the UK
- Employee benefits with your salary
- Being in receipt of tax credits or child benefit
- About to retire or already retired