Many people end up paying too much or too little Income Tax but don’t understand why. So it’s important to know how to check you’re paying the right amount. This article tells you what to look for, where to find it and what to do if you find you’re paying the wrong amount.
If you’re an employee and/or you get a company pension
Your employer or pensionprovider uses your tax code to work out how much tax to take off your pay or pension. So if your tax code is wrong you could end up paying too much or too little tax.
You’ll findyour tax codeon your:
- pay slip
- PAYE (Pay As You Earn) Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
- form P60 – you get this at the end of each tax year
- form P45 – you get this when you leave a job
Check that the different letters and numbers that make up your tax code are right. This is really important if you’ve got more than one job or source of income – or if you change jobs a lot.
- Understand your tax code and how it works
- How to check your tax if you have more than one tax code
- Understanding your PAYE Coding Notice
You must tell your Tax Office as soon as possible so they can correct it. You may get some tax back – or you might have to pay a bit more.
- What to do if your tax code is wrong
If you get bank or building society interest
Your bank or building society takes tax off the interest from your savings before you get it.
It’s a good idea to check with your bank or building society whether you should get tax-free interest on your savings and investments.
- Getting tax-free interest on savings or claiming tax back
- More information about tax on savings and investments
If you’re self-employed and/or you fill in a Self Assessment tax return
You can fill in a Self Assessment tax return online or senda paper return to HM Revenue & Customs (HMRC) by post.
If you fill in your tax return online you’ll find out straight away how much tax you owe – or are owed back. If you fill in a paper return and send it to HMRC by 31 October following the end of the tax year they will work out your tax for you.
If you complete a paper return and it reachesthem after 31 October you’ll have to pay a penalty for sending it in late and you may have to work out your own tax. If you file online your tax is worked out automatically and the latest filing deadline is 31 January.
- More information on how to fill in your tax return online
If you fill in a paper tax return,HMRC willsend you a tax calculation statement. This tells you what tax you owe – or are owed back – and howit’s beenworked out. Check this and letthem know straight away if you think it’s wrong.
You willalsobe senta demand for payment, called a Statement of Account, shortly before you’re due to pay any tax.
If you sendHMRC a paper tax return after 31 October you’ll have to pay any tax you owe by the due dates – even if you haven’t had a statement yet.
- Understanding your Self Assessment Statement
- More information on Self Assessment
Telling HMRC about changes that might affect your Income Tax
LetHMRC know immediately about any changes in your circumstances. If you don’t, you could end up paying the wrong amount of tax.
For example, you’ll need to tellthem if you:
- get married or form a civil partnership – and one of you was born before 1935
- start getting a second income
- become – or stop being – self-employed
- start getting company benefits – like a company car or health insurance
- start getting the State Pension
- Reporting changes that might affect your tax
It’s important to keep information and paperwork about your tax and income, like:
- Statements of Account
- Coding Notice letters
- bank statements
- dividend vouchers
You may need to check these if you have any questions in the future or you want to make sure you’re paying the right tax.
- More information on record keeping for tax purposes
Income Tax – quick check calculator
If you’re single, aged under 65, a basic rate taxpayer – 20 per cent – and you get the basic Personal Allowance, you can useHMRC’s simple tax checker. It’ll help you to find out if you’re paying about the right amount of tax.
You’ll need to have ready details of:
- your total earnings for the tax year before tax was taken off
- the total tax you paid on your earnings
- the amount of interest you had from bank and building society savings after tax was taken off
- the total tax you paid on bank and building society savings
- the total amount of any Gift Aid donations you’ve made
The tax checker will only give you an estimate. You might get other types of income, allowances or benefits that affect the amount of tax you end up paying.
(The tax checker has been developed for students but you don’t need to be a student to use it.)
- Basic information on Income Tax
How to correct mistakes
There are different ways of claiming tax back. It depends if you pay tax through PAYE or if you’re self-employed and you fill in a tax return. It also depends on which year you’re claiming for.
If you’ve paid too little taxHMRC write to you and explain why it’s happened and what to do.
- How to correct mistakes in your tax