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How to check if your tax code is correct

When your employer makes a tax deduction from your wage, you may feel a little aggrieved, but assume that is just the way things are.

However, if your tax payment does seem unusually high, it is worth checking to see if the calculation is correct. Payroll software and systems are generally very accurate but, if the wrong tax code is being used, then this could mean too much or even too little tax being subtracted.

Your tax code is supplied by the HMRC (HM Revenue & Customs), but if your employer hasnt received it, or if theyve keyed in the wrong code, an error may occur.

Fortunately, this is easy enough to check. Just take your tax code off your wage slip and figure out whether it matches your circumstances. If it doesnt or if you are unsure, speak to your payroll department.

This article will help you to understand what the different tax codes represent.

Tax codes usually take the form of three or four numbers, followed by a letter. However, if your tax code begins with a K or is D0, BR, or 0T, then your tax deduction may be higher than average.

This doesnt automatically make it wrong. There may be a very good reason why you are paying more tax at the present.

An obvious example, is with the tax code D0. This usually occurs when you have another job that is using up all of your tax-free pay AND your level income means you are subject to the highest tax band of 40%.

You are not being penalised for having two jobs, but your second employer has to handle your calculation differently to ensure that you are paying enough tax.

If you tax code begins with K, this means you are receiving employee benefits (a company car for example) that are worth MORE than your tax-free allowance. In that case an extra tax deduction needs to be made the cover the deficit.

The other two tax codes that most commonly result in a higher tax deduction are BR and 0T. Click here to read the rest of this article.