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Now we go into detail on exactly what to do if your tax code is wrong, whether you're in the happy position of being due money back because you've overpaid tax, or not-so-happy position of owing cash, as you've underpaid tax.

What to do if your tax code's wrong

Now you understand what your tax code means, you'll be able to assess whether it's likely to be correct for your earnings and situation. If your tax code doesn't look right, it probably isn't.

The onus is on you to get on the right tax code. We now have two possible scenarios, and one is much more fun than the other. If you've overpaid tax, read on. If you've underpaid, skip to the "I've underpaid" help.

I've overpaid tax – how do I get my cash back?

If your tax code is wrong the first thing to do is tell HM Revenue & Customs (HMRC) that you think your tax code may be wrong, and why.

It's probably simplest to call HMRC on 0300 200 3300 so you can resolve your situation with a human and ask questions along the way. You can also use the HMRC app – see our guide to the HMRC app for full info.

Alternatively, you can contact HMRC online via your personal tax account to let it know your tax code is wrong – you'll need to log in/set up an account using your Government Gateway or Verify ID. 

How and when will I be repaid?

This depends on the tax year your claim refers to. If it's the current tax year and you're paying too much tax as a result of your tax code right now, HMRC will inform your employer, the tax code will be amended and the overdue tax will be refunded to you through your wages.

After the end of the tax year, HMRC will send you a P800 (or in some cases a 'simple assessment' letter). If you're self-employed or the tax refund refers to previous tax years, you'll be able to claim your refund online (your P800 will tell you if you can) or HMRC will send a cheque in the post.

In some cases, HMRC will pay a paltry rate of 0.5% interest on any tax you have overpaid.

How far back can I claim?

As we say above, HMRC will adjust your tax code for the current year to correct errors. If the problem has been going on longer, you can claim back up to FOUR additional years of overpaid tax. This means you can currently go back as far as the 2020/21 tax year.

However, even if the deadline has passed for the tax year in question, don't let this put you off getting back what's yours. In certain circumstances – including when HMRC is at fault – your claim will be considered. So fight your corner.

I've underpaid tax – what happens now?

In most cases, you'll have to pay it back – generally HMRC can only go back four tax years, but this extends to six years if you acted carelessly and 20 years if you acted deliberately.

How you go about paying what you owe depends on the amounts involved and how HMRC has dealt with your case – though it's always important to check you agree with HMRC about how much tax you've underpaid.

But it wasn't my fault I'm on the wrong code!

The official line from HMRC is that it is each individual's responsibility to check they are on the right tax code. However, if your code was wrong there are some situations where you might not have to pay the tax bill. This could include:

  • If your employer made a mistake and put you on the wrong tax code despite being sent the correct one by HMRC. In that case, HMRC should try first to recover the tax from your employer.
  • If HMRC reviews your tax and finds an underpayment of £50 or less in the last year, it'll write off the tax.
  • If the underpayment was made in a tax year ending more than a year ago, you may be able to challenge via the not-so-catchy name of an extra-statutory concession – or an A19 (read more about this on and below).

See the Low Incomes Tax Reform Group's guide on underpaid tax for more.

How to reject underpayments more than a year old

Using an A19 – a little-known clause that lurks deep in HMRC's complex book of rules – ISN'T guaranteed, and in fact it's far from likely to work. But there is a possibility, so it may be worth giving it a go.

To even think about going down this route, you must strictly fulfil the following criteria:

  • The underpayment is more than 12 months old.
  • HMRC was given the CORRECT information.
  • You can demonstrate a 'reasonable belief' that your tax affairs were in order, which can be tricky – for example, if you suddenly started receiving loads more pay, it can be argued you should have spotted it!

This means that at present, if you underpaid in the 2022/23 tax year or earlier you may be able to go the A19 route. You will also need to have all your paperwork and dates in perfect order. You can apply for an exemption under an A19 simply by calling or writing to HMRC.

A19 doesn't apply to me – I have to repay. How do I do that?

If you do owe the tax HMRC claims you do, you will have to repay. But the good thing is you don't have to repay it all at once. If you owe less than £3,000, HMRC may simply adjust your tax code at the start of the new tax year to claw back the sum you owe.

For example, if you're a basic 20% rate taxpayer who underpaid £200 during the last tax year, you would need to be taxed on an additional £1,000 of income over the next tax year to repay this sum. Assuming you have the standard tax code of 1257L, it would be adjusted to read 1157L (£12,570 minus £1,000 with the last digit removed).

For larger amounts, HMRC will send you a bill regardless of when it is in the tax year and give you 30 days to cough up. If you cannot make the payment, don't worry – you can call HMRC and arrange a repayment schedule. For more information, read HMRC's 'Time to Pay' guidance and what to do if you're in difficulties.

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