‘I feel very stupid’ Employee on wrong tax code ‘gutted’ after overpaying tax for 12 years

LBC caller emotional over lack of support paying parent's taxes

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Reddit user “Scoggy” shared their story earlier this year on the personal finance forum, where Britons can ask questions and discuss their financial situation. Scoggy only realised they had overpaid thousands in income tax when they finally checked their tax code.

They summarised their issue: “I have simple PAYE tax affairs, and feel very stupid for not paying attention to my tax code.

“I changed jobs in December 2009. In my old job I had private medical insurance, and don’t in my current job.

“This month I found out by chance that my tax code has included £918 medical insurance for each year since 09/10. I was gutted as it means I’ve overpaid tax for 12 years.”

They reported the mistake to HMRC and were able to receive a refund of £1,800. 

However, this is a pittance compared to the taxes they overpaid. 

HMRC reportedly told Scoggy that they system being used didn’t go back far enough to provide a larger refund. 

Scoggy concluded: “Moral which I think everyone but me already knew: check your tax code!”

Tax codes are allocated by HMRC and used by employers or pension providers to work out how much people owe in income tax. 

Britons can check their tax code online in their personal tax account which will show them their current tax code, their code from the previous tax year and the next tax year. 

1257L is currently the most common tax code used for Britons who only have one job or pension. 

This number indicates one’s tax-free allowance, which for many is the general personal allowance currently at £12,570. 

People who believe their tax code is wrong should contact HMRC, especially if there has been a change in their income which would affect their tax. 

Typical things that can affect one’s tax code include:

  • Changing jobs
  • Having more than one job
  • Starting or leaving a job in a tax year
  • Retiring in the tax year
  • Having more than one source of income
  • Changing deductible allowances
  • Changing taxable benefits.

The personal allowance threshold for income tax will be frozen until 2026.

Once workers’ wages go above the Personal Allowance threshold, they are taxed at a 20 percent rate for earnings between £12,571 and £50,270.

If their earnings increase even further they will pay 40 percent income tax for earnings between £50,271 and £150,000. 

Any earnings higher than this amount is taxed at the highest rate of 45 percent. 

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