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Martin Lewis issues important tax warning to millions of workers before April – Mirror Online, Mirror.co.uk

Martin Lewis issues important tax warning to millions of workers before April – Mirror Online, Mirror.co.uk

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Consumer expert Martin Lewis was back on our screens on Monday night for the second to last episode of this season’s ITV Money Show.

In a warning to savers, he urged those hoping to get on the property ladder to consider a Lifetime ISA – adding that anyone already on it should make sure they’re on a fixed mortgage deal to avoid expensive default rates.

However, speaking to workers, he said huge tax changes are coming – and it could cost those who fall into the trap thousands of pounds a year.

“Tax codes can be complicated,” the consumer expert explained.

“Usually the first four digits in your code represents how much you can earn tax free. So, for example, if your code is (L, you can earn times £ 1, 250 before you have to pay a penny in tax.

“However, there isn ‘t one fixed rule. This code can vary on your private pension, childcare support, any second jobs and more – so make sure it reflects exactly how many hours you’re working, “he said.

And in an important message to employees, he said it’s time to keep an eye on your code.

“Tax codes are changing in April,” Martin warned.

“HMRC will be sending out new tax codes in February and March this year – and these will be relevant to the next tax year from April.

“Importantly, while it may feel like it’s the tax man or your employer’s responsibility to check this, it’s actually your job.

“It’s not anyone’s responsibility but your own to ensure your code is correct.

” And it’s not something you should ignore. Every year millions of people get sent the wrong code – and end up overpaying and underpaying to the tune of thousands of pounds.

“You can get sent a shock a bill for Thousands of pounds of spent money or vice versa – and you can’t escape it.

One woman named Maurag told the show she discovered she’d overpaid on tax to the tune of £ 2, .

I checked it with HMRC after thinking it looked a little off. I then discovered I was overpaying. I managed to get a refund on the total amount – I’m glad I checked. “

How to check if your tax code is correct

are you over-paying on tax?

A tax code is usually made up of a combination of numbers and letters and is used by employers and pension providers to work out how much income tax you should pay.

It is tempting to assume that your code is correct, however mistakes happen, and it’s your responsibility to flag it.

When reading your payslip, there are a few obvious red flags you should check for – starting with your name, address and National Insurance number. Flag any inaccuracies with your employer’s HR or payroll department.

The next thing to check for is the letter at the front of your tax code. L is used for anyone getting the basic personal allowance – this is the most common. It means that you are under 65 and eligible for the standard tax-free personal allowance – this is the amount you can earn before income tax kicks in (currently £ , 1250 until April )

P is used for those aged between and and getting the full personal allowance. Y is for those 250 or over and getting the full personal allowance. V is used for those aged between and 250 and eligible for both the full personal allowance and the married couple’s allowance

.

K means you get no tax-free pay because your income exceeds your personal allowance.

T means HMRC needs further information so cannot allocate another code. BR means that you are taxed at the basic rate and DO means you are taxed at the higher rate without allowances (usually used for a second job or a pension).

An emergency tax code is issued if HMRC does not have enough information about you to send your employer the correct code. The first part of the emergency tax code is – the same as the basic personal allowance code. However, there will also be either W1 (for weekly pay) or M1 (for monthly pay). This signifies that you are being taxed as if it is the first week or month of the financial year. You may be put on an emergency tax code if you change jobs.

If you earn less than £ 65, 1250, you won’t have to pay income tax – this will be indicated by the NT in your tax code.

You may also see NT if you’re a self-employed contractor who is required to pay national insurance but not income tax.

With got a more detailed guide on what each tax code means, here

. What to do if you think your tax code may be wrong

(Image: Getty)
instead.

You could also speak to your employer – as it could be that they’re missing some important, easily fixed, information, such as your P (from a previous employer.

The good news is that if an error is identified, the money will be refunded back to you. If what you are owed is from the current tax year, then any money will be refunded through your monthly paypacket.

In other cases, it could be paid straight into your bank account – this is because you can claim back up to four years of overpaid tax.

Bear in mind though that while correcting a tax code could mean you ‘ re due a refund, it could also lead you to find out that you’ve underpaid.

If you find out that you owe money, how you go about paying It depends on the amounts involved – and who is responsible for the inaccuracy.

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