3 min Read
31 Jul 2019

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

More about Damien

Check you are paying the right amount of income tax – 2 minutes

What you need to do

  1. Go to our income tax calculator
  2. Make sure the ‘tax year’ is set to the current one and the right age band is selected.
  3. Don’t worry about the ‘tax code’ field or the email field but fill/tick the others if relevant.
  4. Then enter your annual gross salary and click ‘calculate’.
  5. The calculator will tell you the net amount you should be receiving each month (or week) after tax and national insurance. If this number pretty much matches the net amount that goes into your bank account each month (or the net amount on your payslip), that’s great. It would seem that you are paying the right amount of income tax and that you are entitled to the full income tax personal allowance (which is the amount you can earn tax-free). (TIME TO COMPLETE 2 MINUTES)

But if the figure was not what you had expected then:

  1. Get your latest payslip.
  2. Check that there aren’t any deductions that you forgot to include in the calculator, such as pension contributions.
  3. If there aren’t then check the tax code printed on the payslip.
  4. Note down the tax code (made up of three numbers and a letter). Now go to https://www.gov.uk/tax-codes where you’ll find a full explanation of what your tax code means as well as the tax code used for most people. In the 2019/20 tax year this is 1250L.
  5. If you think your tax code is wrong then contact HMRC and inform them of the error. If you’ve overpaid tax then you can expect a rebate via your pay packet.

The theory

This applies to anyone receiving an income via PAYE (pay as you earn). So if you’re self-employed and not receiving a pension you won’t have a PAYE code. While your tax code might not look much (three numbers and a letter), it’s important as it tells your employer how much tax to deduct from your wages. If it’s wrong you could be paying too much or too little tax and if it’s the latter the tax man will want his dues. So it’s crucial to make sure you’re on the right tax code and therefore paying the right amount of income tax.

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