Research of 54,000 UK employees has found that 36% had paid too much tax as a result of being given the wrong tax code in the previous 4 years. This has meant employees have lost out on an average of £204.00 each.
Shocking statistics from our perspective as payrollers are:
47% of employees never check their payslips
71% believe someone other than themselves is responsible for making sure they pay the correct tax (typically HMRC or their employer)
32% did not know that having more then one job affects their tax.
The complexities of the UK tax system make it hard for ordinary tax payers to check their own tax code. Most employees have no idea they even need to, assuming HMRC automatically issue the correct tax code and that their employer would know if it was wrong. From our experience, we can tell you this is not the case. Where employees are unaware they could have a problem, their employers will also be unaware a problem exists.
To avoid your employees being on an incorrect tax code, we have a few tips:
* Ensure new starters complete the employment declaration correctly. Is this their first job since April? Is this their only job now? Do they have another job also?
* Employers: ALWAYS tell your employees to check their payslips every pay period! If they don’t check, how will they know if their tax is correct?
* Employees: NEVER assume your employer would know what tax code you should be on and NEVER assume HMRC are always correct!
* Employees: HMRC will always issue you a breakdown of how they calculated your tax code. If it looks wrong, or you are unsure about it, please contact HMRC immediately to get it corrected soonest.
As an online agent for our clients, tax code notifications are issued by HMRC and downloaded direct into our payroll software. We are not given any explanations as to the reason for that tax code change, as that is personal to the employees only.