Having the wrong code could mean you're losing income to the taxman(Image: GETTY)

HMRC 'costly mistake' as Brits urged to find and fix before December

by · NottinghamshireLive

Brits could be in for a shock with unexpected tax bills this December or might end up with extra cash, according to specialists. Experts from BizSpace alert about the possibility of overpaying HMRC or facing unpleasant surprises post-holiday season due to tax code errors.

They emphasised that paying attention to one's tax code is crucial: "Keeping an eye on your tax code and understanding its implications is essential for managing your finances effectively," reports the Express.

They added: "Mistakes can happen, but by staying proactive and informed, you can catch errors early, avoid unexpected bills, and ensure you're not paying more than you should."

Your tax code is a combination of letters and numbers reflecting your tax obligations tailored to your employment, income, and personal situation. For instance, the common 1257L indicates the standard £12,570 Personal Allowance before taxes kick in.

Other codes like BR and D0 suggest all income is taxed at basic or higher rates respectively, while 0T signifies no tax-free allowance.

This typically applies if you've begun a new job but have already used up your yearly allowance at your previous employment. There are numerous other codes that signify different levels of tax liabilities, and having an incorrect one could lead to overpaying or underpaying taxes.

This can result in unexpected refunds or tax bills, with the latter potentially including interest and penalties. Experts are advising individuals to rectify any incorrect tax codes before December, to either boost their net pay or avoid hefty HMRC bills during the festive period.

You can achieve this by providing HMRC with updated personal and financial information to prove that your tax code is incorrect. While communicating with HMRC, you can request a refund if you've paid too much tax.

If you've underpaid, you can also use this opportunity to negotiate a repayment plan with the department that accommodates both your tax liability and financial circumstances.