Five questions to ask about: Tax codes

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The Independent Online

Why could my tax code be incorrect?

HM Revenue & Customs is currently issuing people's tax codes for the 2010-11 tax year, which begins on 6 April, but it has warned some may receive the wrong code because of problems with a new computer system. The problem is affecting pensioners but everyone should check they are on the correct code as mistakes can happen.

How do I know which tax code I should be on?

Your tax code depends on the rate of tax you pay, what personal allowance you qualify for and the amount you earn. It is made up of a letter and numbers. If you multiply the number by 10 it will give you the total amount you can earn in a year before paying tax. The letter indicates how the number should be adjusted to take account of any allowances.

Common letters are L, which indicates you are eligible for the personal allowance of £6,475. This is what you can earn before you start paying tax. Those aged between 65 and 74 should have a P coding, and anyone over 75 will probably be on a Y code. Other common letters are T, which applies if there are other things HMRC needs to review, and K. This is applied if your total allowances are less than your total deductions.

Where can I get help if I'm unsure how to work out if my code is wrong?

The HMRC website has information. Also, your HR department at work, or pension provider if you are retired, should help.

Will this problem be rectified before the beginning of the new tax year?

HMRC states it is looking at ways to correct as many discrepancies before 6 April. But don't assume any mistake will be rectified automatically – it is always worth double-checking.

How do I correct an error?

The sooner you sort it out the better. You can find the name of your local tax office on your coding form, or by getting in touch with your employer or HMRC directly.

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