Most people will pay the correct amount of tax each year. However, it is important to be able to check whether you are paying the right amount, so that you aren’t owed money at the end of the tax year or owe anything to HMRC. There are ways to check whether or not everything is in order, depending on whether you are within the PAYE system or self assessment
If you complete a self assessment tax return each year, you can either ask HMRC to calculate your tax for you or you can work out the amount you owe. If you complete a tax return online, you will be informed immediately how much is owed. If you complete and submit a paper return before 31st October, HMRC will work out how much you owe and inform you by sending a calculation. You should check that all the figures are correct, as mistakes could lead to paying too much or owing HMRC.
Changes that could affect the amount you owe
If there are any changes in your personal circumstances, you should notify HMRC. These may include starting a second employment, starting to receive a pension, becoming self employed, or ceasing self employment. There are many other changes that could affect your tax bill at the end of the year.
Checking your code
Everyone over the age of 16 is entitled to personal allowances, which are basically the amount of income you can receive each financial year without paying tax. Your tax code will include your personal allowances, any deductions, and any expenses or other allowances that you are claiming. All deductions, which may include car benefits or your state pension, will be taken from the personal allowances to which you are entitled. The sum remaining is the amount of income you can receive without paying any tax. There are other, more complex scenarios, and you may need to seek professional advice.
When you receive a Notice of Coding, take the time to check all the figures and query anything you are unsure about. Your tax code will be calculated each year using the information which HMRC holds for you. If anything is incorrect, contact HMRC to have the details rectified. You will also find the tax code being used by an employer on your payslip or end of year P60 form.
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