Martin Lewis shares urgent tax code warning after man hit with £5,000 tax bill
Money Saving Expert founder Martin Lewis explained the importance of checking tax codes after a viewer on This Morning was hit with a £5,000 bill.
Martin Lewis shares urgent tax code warning
Financial journalist Martin Lewis has warned Britons that it is “your responsibility” to ensure a tax code is correct after one viewer wrote into ITV’s show This Morning to share how he is currently facing a £5,000 tax bill. According to Mr Lewis, millions of codes are wrong, making it crucial for people to check theirs “at least once a year”.
A viewer disclosed how they received an email from HMRC saying they owed £5,000 in tax as several years of tax calculations had not been finalised and their employer did not have them on the correct tax code.
The viewer said: “HMRC said it’s my responsibility to check my tax code. I thought, as a contracted employee, I would be safe and monitored by my employer and HMRC. I have no savings, what can I do?”
Apologising to be the bearer of bad news, Mr Lewis said: “HMRC are right. I do this warning at least twice a year on my shows.
“If you’re an employee, you get a tax code sent to you each year. That tax code dictates how much tax needs to be taken off by the employer when you are paid.
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“Millions of them are wrong and it is your responsibility, not HMRC or your employers to ensure it is right - which is a really difficult thing because it’s really complicated.”
He added: “Everybody should be checking if their tax code is right. There are free calculators online, they’ll give you a rough indication to see whether it looks likely to be right or not.
“If it isn’t right, it’s a nightmare if you’ve underpaid - they want the money back. And if you’ve overpaid, you can get a refund.”
Circling back to the viewer’s circumstance, Mr Lewis said: “Unless there’s something - a proper administrative error - such as your employer having the right tax code but taxed you wrongly, then it is your responsibility.
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“If you can’t afford to pay it, HMRC should let you talk to them and defer the payments over a longer period.
“Messing with the tax office is the one thing you can’t do. You may want to go and get an accountant to see if there’s anything that can be done here, but in general terms, your tax code is your responsibility.
“Therefore, if you have underpaid, you will owe the tax. This is why everybody should be checking their tax code at least once a year to check that it is appropriate. Millions are wrong each year for lots of complicated reasons."
He then summarised that the viewer should get help from an accountant if they can afford to, speak to the payroll office in their firm to see if they can offer any help, and contact HMRC to see what they can do.
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He warned, however, the viewer was "probably going to have to pay this".
What is a tax code?
A tax code is used by an employer to calculate the amount of tax to deduct from an employee’s pay, and it’s usually made up of letters and numbers.
Most people who pay tax in the UK are entitled to a personal allowance and for 2022/23, this is typically 1257L.
This generally means the first £12,570 of a person’s earnings are free from taxation. However, the code can go up or down depending on a person’s circumstances due to things like tax underpayments.
This makes it important for people to clarify their code with HMRC to ensure they’re paying correctly. People can use an aforementioned tool to do this, such as Money Saving Expert’s income tax calculator.
This Morning airs on weekdays on ITV from 10am.