The Nightmare of Tax Codes – Why You Might Be
Overpaying HMRC

Taxes are a nightmare. Let’s not pretend otherwise. Anyone who has ever had to ll in their own tax return will know the feeling of
abject bewilderment and frustration which goes hand in glove with the whole sorry experience.
Worse – after all that annoyance, it transpires that many of us may still be paying too much tax. It’s a far from ideal situation, and
one not likely to improve when it is considered just how confusing and mystery-shrouded the UK’s tax system is to the
uninitiated.

With a confusing labyrinth of allowances, exemptions, additions, subtractions, and loopholes, it’s extremely hard to know what
you should and should not be claiming for – even if you work in the nancial ofce of a company. For example, many people who
have chosen to stay in work over the legal retirement age are still paying National Insurance, largely because employers are often
unaware that these people are now exempt from NI payments and continue to apply it out of habit. At the end of the day,
incorrect taxes could be leaving you thousands of pounds out of pocket.
One of the best things you can do for your nances is to contact professionals who know the ins and outs of the tax system and
can ensure that you’re paying exactly the right amount.
Changing Circumstances and Emergency Tax Tax codes are tricky things. They have a habit of changing when:
You’ve changed your job and your earnings have altered
• Your state benets have changed
• Your company benets have changed – health insurance, for example
• You’ve been put on Emergency Tax until your new tax code comes through
And it is not just your earnings and employment status which impact upon your tax code. Tax codes are worked out by adding up a
number of factors, including marital status, residential status, and any disability issues. Some of these may contribute to what are
known as ‘allowances’. Everyone gets a basic tax-free personal allowance, i.e. the amount of money you get to keep and spend
without being taxed.
What this amounts to depends largely upon your age and income. Other allowances which can be added to your basic personal
allowances include:
• The Blind Person’s Allowance, which applies if you are registered blind with a local authority and are thus unable to take
employment which requires eyesight,
• The Married Couple’s Allowance, which reduces your tax bill if living together as a couple either married or in a civil partnership,
• Maintenance Payments Relief, which applies if you are over a certain age, you are separated from your partner and paying them
maintenance (child support etc) and need tax relief in order to keep this situation tenable.
If any of the situations mentioned above alters, or appears to alter, you may nd yourself hit with an enormous amount of tax as
your allowances are removed, or even given an emergency tax code (which invariably takes more rather than less money) while
HMRC processes your new circumstances. Money.co.uk has a helpful guide to tax codes and reclaiming excess tax if overpaying
which can be found here. However, if you’d rather not struggle through the mire of paperwork yourself, then your best bet is to

can be found here. Theoretically, many employers should work out employee taxes as they go and apportion a certain amount to
the tax ofce. However, in practice many of the minutiae such as expenses reclaiming, professional fees and so forth often get lost
in the salary maelstrom, so it may be best to consult an accountant who will be able to contact HMRC directly and process your
tax breaks at the source

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