Are you on one of the common emergency tax codes?
Everyone changes jobs at some point in their career. If you are lucky, you changed jobs and your employer received your tax code from HMRC straight away, you got taxed correctly and took home the correct amount of pay.
Unfortunately, many people are not so lucky. It's difficult for HMRC, dealing with millions of UK tax payers and issuing their tax codes, to keep up with your career moves. If you are an employer, chances are you won't have received your new employee's tax code from HMRC before the employee's first pay day. You need to calculate their pay and taxes in time for payday, so you use an emergency tax code as an interim measure.
The problem comes when your employee doesn't understand the tax code that you have put them on, and then somehow or other HMRC's tax code confirmation never reaches you. Your employee could have been over or underpaying tax for months without anyone realising.
Tax codes are so complicated, how can we expected employees to understand them?
If you haven't already checked out our blog post on Understanding and Checking Your Tax Code then we recommend giving this a read and sharing it with your employees.
We've put together a handy guide for employees covering the 5 main Emergency Tax Codes:
While you are on an emergency tax code there is a chance that you could pay too much or too little tax. Which means you either aren’t getting as much pay in a month as you are entitled to, or you are receiving too much pay because you aren’t paying enough tax. Which may sound great, until HMRC catch up with you and you get an unexpected letter about paying them the tax you owe.
Our guide includes information for employees about what to do if they think they are incorrectly on an emergency tax code.
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Categories: Financial Education