July 2024

Reviewed by Ryan Carman ATT, Head of Operations at RIFT Refunds.

A tax code is a series of numbers and letters your employer uses to work out how much tax to deduct from your earnings. You’ll get a tax code for each job you have, and it’s important to keep track of them. They determine how much of your income is tax free.

You might need to change your tax code if you start a new job, receive additional income, or if your personal allowance changes. It’s good to keep an eye on any tax code changes. If it’s wrong, you might be taxed too much or too little. A rebate is always nice, but unexpected bills certainly aren’t.

Here are the key details you need to know to change your tax code correctly.

Understanding your tax code

In a nutshell, a tax code is a mix of numbers and letters determined by HM Revenue & Customs (HMRC) and used by your employer to calculate how much income tax you pay.

The numbers represent the tax-free personal allowance that you’re entitled to in that particular tax year, while the letters indicate your tax situation. This could be ‘L' for standard personal allowance, 'M' for Marriage Allowance or 'K' if you owe tax from previous years.

The best way to make sure you’re never paying more or less than you owe is to keep an eye on your tax codes. Always check your payslip and notify HMRC of any changes in your circumstances. This way they can keep everything up to date and running smoothly, with no surprises.

Why are tax codes important?

Correct tax codes are important for a few key reasons.

Prevention of overpayment/underpayment

The correct tax codes will ensure you're not paying more or less tax than necessary. Paying less income tax than you owe can lead to a surprise bill later down the line.

Continued financial stability

Having the right tax code means you receive the right amount of take-home pay.

Ensures compliance

Keeping all your details in order will mean you stay on the right side of tax regulations.

Increased efficiency

Ensuring your tax code is correct will save you time and effort by preventing unnecessary tax issues.

How to check your tax code

Checking your tax code couldn’t be easier. Simply follow the steps below.

  1. Go to HMRC's tax code checker
  2. Enter details as requested
  3. Check your current tax code on the website
  4. Make sure the code matches what's on your payslip or P60
  5. If you believe your tax code is wrong, get in touch with HMRC on 0300 200 3300

It pays to keep an eye on your tax code. It's a lot easier to monitor it and fix mistakes quickly than it is to sort out prolonged tax issues later down the line.

Why has my tax code changed?

Your tax code may change for a few reasons, and in most cases it’s nothing to worry about. HMRC will usually update your tax code automatically in response to a change in your income or personal allowance.

HMRC will get this new information from your employer, and will adjust your tax code to reflect your current financial situation. This automated process keeps things working smoothly and efficiently. It also helps to reduce any errors throughout, so you’re never paying more or less than you owe.

Ryan Carman ATT, Head of Operations, adds:

If you’ve recently claimed a tax refund you’ll need to keep a close eye on your tax code. When you’ve claimed for work expenses, like mileage for example, HMRC will sometimes change your tax code so you pay less tax the next year. 

When they do this, they’re assuming your yearly mileage, and the expenses you’re claiming tax relief for will stay the same. However, that often won’t be the case, as it will depend on your working situation and how much travel you’re doing for work.

So, here’s our top tips for checking your tax code:

  1. Look at your current payslip
  2. Is your pay higher or lower than usual?
  3. Were you expecting it to change?
  4. If no, DON’T spend it yet!
  5. Contact HMRC or, if you used a tax refund specialist like RIFT, tell them immediately about the change.