Check your tax code - you may be entitled to a refund

Many taxpayers do not know they may be paying more tax than they should. Others may not be paying as much as they should and may not realise that they have a responsibility to let HMRC know.

John Cullinane, President of The Chartered Institute of Taxation (CIOT), says: “Those taxpayers who complete a self-assessment tax form are given an explicit opportunity to state how much tax they should pay. For everyone else the PAYE code is effectively their tax return - yet most UK taxpayers assume the PAYE code and coding notices are correct. This is like signing your tax return without reading it.”

The CIOT recommends that all PAYE taxpayers check their PAYE code and coding notices they receive against their own income and reliefs that may be available. There is information on the HMRC website about income that must be reported and reliefs that may be claimed. PAYE taxpayers should keep records of their income, the tax they have paid and check any communication HMRC send them.

In recent research undertaken on behalf of the CIOT, 47% of UK taxpayers polled said they never checked to see if their PAYE code is correct. 42% said they found it ‘very’ or ‘fairly’ difficult to understand if they are paying the right amount of tax.

John Cullinane adds: “The majority of people in the UK have most of their tax collected through PAYE. A December 2006 National Audit Office report indicated that HMRC estimated that last year taxpayers may have overpaid around £500 million via PAYE, and that £1 billion of tax may have been underpaid. They estimate that 5.7 million taxpayers may not be paying the right amount of tax. This is why the CIOT is bringing the issue to the public’s attention now. We agree with HMRC that it is vital for people to keep their tax records and also urge them to make sure they understand their tax code.”

For anyone struggling with their PAYE code, the CIOT recommends they first contact their local Tax Office.