Why Has My Tax Code Changed?

Your tax code is that little code on your payslip. It determines how much tax you pay each period. You might be reading this as your tax code has recently changed meaning the amount of tax you pay has altered. This blog will help you understand why it’s changed and potentially how you can change it back.

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What Does My Tax Code Mean?

Your tax code consists of numbers and letters, indicating how much tax-free income you can have in a year. If you want detailed information on what each code means, check HMRC’s Tax codes: What your tax code means webpage.

Why Has It Changed?

Your tax code can change for various reasons. HMRC updates your code to ensure you’re paying the right amount of tax. Here's why it might change:

1. New Job: Starting a new job can alter your tax code.

2. State Benefits: Receiving taxable state benefits affects your code.

3. Additional Income: Earning from an extra job or pension changes your code.

4. State Pension Changes: Adjustments to your weekly State Pension impact your code.

5. Job Benefits: Starting or stopping job benefits can lead to a code update.

6. Marriage Allowance: Claiming Marriage Allowance affects your tax code.

7. Tax Relief Expenses: Claiming expenses for tax relief changes your code.

8. High Earnings: If you start earning over £100,000, your tax code will change due to a reduction in your personal allowance.

9. Self-Employment and Employment: If you are both self-employed and employed, your tax code may be adjusted to reflect income from both sources.

10. Tax-Free Allowances: Changes in personal allowances, such as blind person's allowance or married couple's allowance, can alter your tax code.

11. Tax Refunds: If you’re due a tax refund, your code may be adjusted to account for this.

12. Company Benefits: Receiving new or different company benefits, like a company car or medical insurance, can change your tax code.

If HMRC doesn't receive your income details in time after you change jobs, you might be put on an emergency tax code.

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How Can I Change My Tax Code?

Your employer or payroll provider can’t change your tax code without HMRC's notification. Usually, HMRC updates your code automatically when your income changes, based on information from your employer.

If HMRC has incorrect details about your income, you might get the wrong tax code. To fix this, ensure HMRC has your up-to-date income details.

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What If My Tax Code Is Wrong?

If you think your tax code is incorrect, you can use the Check Your Income Tax online service to:

• Update your employment details

• Inform HMRC about changes in your income

• Add company benefits

• Add missing employers or income

• Claim employment expenses

• Update your estimated taxable income

HMRC might change your tax code based on your updates. If you can’t use the online service, contact HMRC directly.

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After You Update Your Details

Once you update your details, HMRC will notify you, your employer or payroll provider if they change your tax code. They will also inform your employer or pension provider. Your next payslip should reflect your new tax code and any pay adjustments if you were paying the wrong amount of tax.

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Stay Informed

Understanding your tax code helps you stay on top of your taxes. Always check your payslip for updates and use HMRC’s online services for any changes. If you have concerns, contact HMRC for assistance.

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Stay proactive with your finances and ensure you're paying the right amount of tax!

Blue Rocket provides payroll to numerous businesses around the Kent, Essex, Surrey and London areas. We assist our clients in understanding their tax codes, helping them navigate any changes smoothly.

You can find out more about Blue Rocket Accounting’s payroll service, here.

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