New tax codes are being issued as we enter the 2024/25 financial year, but how can you make sure you are not overpaying?

A tax code is used by an employer or pension provider in order to work out how much Income Tax to take from an individual's pay or pension.

The most common one is 1257L, which is based on the Personal Tax Allowance of £12,570 - this is the amount you can earn before you need to pay tax.

It is essential to ensure that your tax code is right to avoid overpaying taxes and to potentially claim a refund. Conversely, if you are on a lower tax rate, you may owe money to HMRC.

Adam Park, tax specialist at Zest R&D has warned people to check their tax code.

St Helens Star:

He said: “It is crucial to check your tax code as millions of them may be incorrect, and it is neither HMRC nor your employer is responsible for verifying the correctness of your tax code; it is entirely your responsibility.

“If you have the wrong tax code, it could mean you might be entitled to get cash back if you have overpaid, but might also mean you have to pay some money back if you underpaid."

How to check your tax code

You can find your tax code on your latest payslip or on your P45 if you recently quit your job.

You can also find it on gov.uk/tax-codes but first must register for a government gateway ID.

Letters in an employee’s tax code refer to their situation and how it affects their Personal Allowance. The full list of tax code letters and what they mean can be found on the GOV.UK website here.

These are the most common letters, and what they mean:

  • L - For an employee entitled to the standard tax-free Personal Allowance
  • S - For an employee whose main home is in Scotland
  • BR/ SBR - For a second job or pension
  • M - For an employee whose spouse or civil partner has transferred some of their Personal Allowance
  • N - For an employee who has transferred some of their Personal Allowance to their spouse or civil partner
  • T - When HMRC needs to review some items with the employee

How to claim back tax

If you think you are on the wrong tax code, you can contact HMRC on 0300 200 330 or speak to an advisor online via their live chat service.

HMRC will contact your employer to correct your tax code and you will get any money you overpaid in tax in your next payslip.

You can also claim back up to four additional years if you have been overpaying for some time.