Martin Lewis has issued an urgent warning to UK workers earning over £12,570 a year, emphasizing the potential for costly errors in their tax codes. The Money Saving Expert founder delivered this alert on his BBC Sounds podcast.
A tax code in the UK, comprising numbers and letters, dictates the amount of income tax deducted by HM Revenue and Customs from salaries or pensions. It signifies the tax-free income threshold for the year.
Exceeding the Personal Allowance of £12,570 for most individuals in the 2025/26 tax year triggers Income Tax payment, starting at a 20% Basic Rate on earnings between £12,571 and £50,270, with higher rates thereafter.
Lewis urged UK residents to promptly review their tax codes, warning of potential inaccuracies. He stressed personal responsibility in ensuring correct tax codes, as errors can lead to overpayment of taxes.
Emphasizing the significance of accurate tax codes, Lewis explained the standard allowance of £12,570 per year and the implications of incorrect codes on tax liabilities. Errors can result in either overpaying or underpaying income tax, leading to unforeseen bills or delayed refunds.
Regularly checking tax codes is vital to prevent financial discrepancies, as employers use these codes to calculate tax deductions from paychecks. Lewis cautioned against the repercussions of underpaying taxes, highlighting the eventual need to settle outstanding tax debts.
Encouraging individuals to proactively monitor their tax codes annually, Lewis recommended utilizing free online tax code calculators. Changes in life circumstances, such as new jobs, benefits, pensions, or marital status, can prompt adjustments in tax codes, necessitating alignment with current situations.
Tax codes can be found on payslips, HMRC correspondence, or Personal Tax Accounts on the GOV.UK website. Checking and verifying the accuracy of these codes is crucial, as errors may result from HMRC miscalculations, underscoring the importance of proactive review and correction.