What happened?
A system error at Revenue and Customs resulted in a stream of incorrect tax codes being sent out to hundreds of thousands of workers.
Some people have received two or three different codes in the post, others simply the wrong code - and will potentially end up paying higher rate tax on their full earnings.
Those most at risk of getting the wrong tax code are those with benefits from their employer such as cars or medical insurances, these benefits are potentially being taxed twice.
Those who have changed jobs recently are also being urged to check their codes, as the system may incorrectly assume they have two jobs.
Pensioners have also been affected by allowances and other income being completely wrong.
HMRC says the problems occurred because it was bringing 20 computer systems into one and some old data may have re-emerged and is being treated as current.
What do the tax codes mean?
You will find your tax code on your P45, the PAYE Coding Notice sent by HMRC or on your wage slip.The most common tax codes are formed of several numbers and a letter, for example 117L or K497.If your code is a number followed by a letter, you can calculate the total amount of income you can earn in a year before paying tax by multiplying the number by ten.
The letter indicates any adjustments to this figure, depending on the allowances you're eligible for: L: You get the basic personal allowance. P: You are 65 to 74 and get the full personal allowance. Y: You are 75 or over and get the full personal allowance. V: You are 65 to 74, eligible for the full personal allowance and the married couple's allowance and just pay basic rate tax. K: You get no tax-free pay or owe money to HMRC. T: HMRC needs further information, so cannot allocate another code. BR: You are taxed at the basic rate. DO: You are taxed at the higher rate of tax (currently 40%). NT: No tax is to be taken from your income or pension.
- How tax codes are worked out
How do I fix this?
The taxman says that taxpayers should contact their tax offices to correct information and that staff previously working on self-assessment have now been moved over to help rectify matters. The tax office contact details should be on your tax code letter.
- Letter template: How to challenge your tax bill
What help can I expect from the taxman?
Many people have complained that their dealings with HMRC are unsatisfactory and they are not helped in the way they should be or obstructed.
If this happens to you, you should quote HMRC's charter, which can be found on the HMRC website here.
The charter says:
Our role
We make sure that the money is available to fund the UK's public services by collecting taxes and duties as laid down by Parliament. We help families and individuals with targeted financial support. We want to give you a service that is even-handed, accurate and based on mutual trust and respect. We also want to make it as easy as we can for you to get things right. This Charter explains what you can expect from us and what we expect from you.
Your rights
What you can expect from us:
1. Respect you 2. Help and support you to get things right 3. Treat you as honest 4. Treat you even-handedly 5. Be professional and act with integrity 6. Tackle people who deliberately break the rules and challenge those who bend the rules 7. Protect your information and respect your privacy 8. Accept that someone else can represent you 9. Do all we can to keep the cost of dealing with us as low as possible
Your obligations
What we expect from you:
1. Be honest 2. Respect our staff 3. Take care to get things right