MTTM Podcast Episode 504 – Holiday Scams, Tax Code Checks & Direct Debit Warning

Listen to Episode 504

On this week's show, Andy highlights seven of the most prevalent holiday scams to watch out for as summer approaches. Next, I take a look at UK tax codes, explaining how they work, what the letters and numbers mean (eg. 1257L), why they can often be incorrect and the steps you can take if you think your code is wrong. Finally, I share a critical warning for those who diligently pay off their credit card in full each month when I discovered a little-known issue that could inadvertently harm your credit score.

This episode is sponsored by Coinbase - Visit Coinbase* to learn more. Crypto comes with unique risks, take 2 minutes to learn more

Support the podcast

Remember to like, subscribe and follow us on all our socials. You can also support the Money to the Masses podcast by visiting our dedicated podcast page.

Every time you use a link on the page we may earn a small amount of money for our podcast. We only use affiliate links that give you an identical (or better) deal than going direct. Thank you for being an incredible part of our community. Your support means the world to us.

Watch the video version of the podcast below:

You can also listen to other episodes and subscribe to the show by searching 'Money to the Masses' on Spotify or by using the following links:

Listen on iTunes    Listen on Spotify     via RSS

Episode 504 Podcast Summary

Holiday Scams: Seven Ways Fraudsters Target Your Getaway

Summary

With holiday booking season in full swing, Andy highlights seven prevalent scams targeting unsuspecting travellers. These range from entirely fabricated holiday listings, cloned legitimate travel websites and fraudulent charges for services like e-visas or the GHIC card, which should be free or processed through official channels. Andy also covers scams operating through social media, the sale of non-existent airline tickets and fake travel insurance policies.

Key Insights:

• Verify Everything: Always book through trusted platforms and scrutinise reviews, as AI can create realistic fakes.
• Check URLs Carefully: Ensure you are on legitimate websites, especially for official documents like e-visas or the GHIC card (which is free via the NHS website).
• Secure Payments: Use protected payment methods and consider using a credit card for Section 75 protection.
• Beware of "Too Good to Be True": Aggressively priced deals with no reviews, especially in high-demand situations, warrant extreme caution.
• Social Media Savvy: Be wary of holiday deals advertised on social media, even if they appear to be endorsed by known figures.
• Reputable Retailers: Only purchase flights and travel insurance from reputable, certified agents or directly from airlines and insurers.
• Know Who to Contact: If you suspect fraud, immediately contact your bank, credit card provider, and report it to Action Fraud.

Decoding Your Tax Code: Are You Paying the Right Amount?

Summary

In this section, I explain the importance of understanding and checking your PAYE tax code. The most common code, 1257L for the 2025/2026 tax year, indicates the standard tax-free personal allowance of £12,570. I then break down how the numbers in a tax code relate to this allowance and what various letters (L, M, N, T, OT, BR, D0, D1, W1, M1, X) signify about an individual's tax situation. I highlight the common reasons for incorrect tax codes, such as changing jobs, having multiple income sources, or changes in company benefits. I then explain the potential consequences of an incorrect code – either overpaying or underpaying tax - before providing guidance on how to check your code and contact HMRC to rectify errors.

Key Insights:

• Standard Code: The most common tax code for the 2025/2026 tax year is 1257L, reflecting the £12,570 personal allowance.
• Understand the Letters: Suffix letters on your tax code provide HMRC with more information about your circumstances (e.g., 'L' for standard allowance, 'BR' for basic rate tax on a second income).
• Check Regularly: Millions of tax codes can be wrong each year; it's your responsibility to check, especially after job changes, starting a new job, retirement, or changes to benefits.
• Consequences of Errors: An incorrect code can lead to overpaying tax (resulting in a refund) or underpaying (leading to a future bill from HMRC).
• How to Correct: If you suspect an error, contact HMRC with your National Insurance number via phone (0300 200 3300) or your online personal tax account.
• Emergency Codes: Codes like W1, M1, or X are emergency codes and usually mean HMRC needs more information; these should be temporary.

The Hidden Credit Card Danger: A Word of Warning for Those Who Clear Their Credit Card in Full

I provide a warning for those who consistently pay their credit card balance in full each month and have a direct debit set up as a "safety net" for minimum payments. I share a personal experience where, despite clearing my balance, an attempted direct debit collection failed. This was because the direct debit, having not been used for over 13 months (banks may delete inactive direct debits, often after this period, though some terms mention 24 months), had been cancelled by my bank without my or my credit card company's knowledge. This situation highlights a systemic flaw: if I hadn't manually paid and relied on the "safety net" direct debit, I could have unknowingly defaulted, potentially damaging my credit score.

Key Insights:

• Inactive Direct Debit Risk: Banks may automatically cancel direct debits that haven't been used for an extended period (e.g., 13 months).
• No Guaranteed Notification: Neither your bank nor the credit card company may be obligated to inform you that a "safety net" direct debit has been cancelled due to inactivity.
• Potential for Unintentional Default: If you pay your credit card in full manually each month, your backup direct debit might become inactive and get cancelled. If you then rely on it one month, it could fail, leading to a missed payment.
• Check Your Active Direct Debits: Regularly verify with your bank that any "safety net" direct debits for credit cards are still active, especially if you haven't relied on them for over a year.
• System Flaw: Ironically, those managing their credit most responsibly by paying in full could be more susceptible to this issue than those consistently paying interest via minimum payments (which keeps the direct debit active).
• Complain if Affected: If a similar situation occurs, where a direct debit fails due to cancellation without notice and potentially impacts you, you should complain to the credit card company and escalate it.

Episode quiz 

1. What is a 'phantom holiday' scam?
a) a scam where fraudsters list and take payment for non-existent properties, often using AI-generated images
b) a holiday where the accommodation is worse than advertised
c) a holiday package that offers an impossibly low price but then adds numerous non-optional hidden fees
d) a scam where your flight booking is genuine but the hotel reservation doesn't exist when you arrive

2. How should UK residents apply for a Global Health Insurance Card (GHIC) to avoid being scammed by unofficial websites?
a) through a recommended third-party processing website that charges a small fee for a faster service
b) via the official NHS website, which is a free service for all eligible UK residents
c) by calling a dedicated GHIC application phone line that is advertised online
d) by completing an application form available at their local GP surgery or post office

3. What is the most common tax code mentioned in the podcast for the 2025/2026 tax year for an individual with one job or pension?
a) 1133N
b) 1414M
c) 1527L
d) 1257L

4. If your payslip shows a tax code like W1, M1, or X, what does this often indicate?
a) you are due a significant tax refund from the previous tax year
b) you have overpaid your National Insurance contributions for the current pay period
c) you have been granted an exemption from paying income tax for a specific reason
d) you are on an emergency tax code, and HMRC may not have all your necessary details yet

5. What was the core issue that nearly damaged Damien's credit report (despite him always paying his credit card bill in full?)
a) he had insufficient funds in his designated bank account to cover an unexpected charge
b) the credit card company made an administrative error in processing his manual payment
c) his "safety net" direct debit had been cancelled by his bank due to over 13 months of inactivity
d) he had recently reported his credit card as lost or stolen, which temporarily froze all automatic payments

Answers

1. a) a scam where fraudsters list and take payment for non-existent properties, often using AI-generated images
2. b) via the official NHS website, which is a free service for all eligible UK residents
3. d) 1257L
4. d) you are on an emergency tax code, and HMRC may not have all your necessary details yet
5. c) his "safety net" direct debit had been cancelled by his bank due to over 13 months of inactivity

Resources

Links referred to in the podcast:

• Best travel insurance providers in the UK
• Episode 477 - Ghost Brokers
• More information on Tax Codes and how to get them resolved
• Take out a free trial of 80 20 investor

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use.