Commentators have called on workers to check whether their tax codes are correct ahead of the start of the new financial year – or risk losing thousands of pounds. HMRC has been issuing new tax codes this month ahead of April 6 but the financial expert has warned millions of codes are often wrong and it’s up to everybody to check if they are overpaying. The start of the 2021/2022 financial year also marks the deadline for when people are able to apply to get their money back if they think they paid too much tax in previous years. There is a four year cut-off point for getting a rebate so those who may have paid too much tax in 2016/17 have less than two weeks to apply to get it back. A raft of changes is set to come in with the start of the new financial year. Every worker’s personal tax allowance – the amount you can earn without paying tax – will rise from £12,500 to £12,750 for the last time in five years. In his budget earlier this month Rishi Sunak announced that he is freezing income tax thresholds until April 2026, meaning it will no longer rise with the rate of inflation. The first part of the tax code usually represents the personal tax allowance. This year’s standard code is 1250L but it could be different depending on whether a worker receives any company benefits. Each letter that may appear in the code has a different meaning for example M stands for marriage allowance while BR means all of the income is being taxed at basic rate. Workers are being urged to check while also being reminded that changing a tax code could result in the amount of tax paid going up or down. Anyone who has underpaid tax must come to an agreement with HMRC for how the balance will be paid off in the coming months.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of April 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.