HMRC has clarified the payslip code that tells you if you're receiving a £900 pay boost from Saturday, April 6.
Employees nationwide will see a further reduction in the amount deducted from their payslips due to changes in National Insurance. These NI alterations were announced by Chancellor Jeremy Hunt in the Spring Statement and Budget. National Insurance contributions will be cut from 10% to 8%, following a previous reduction from 12% to 10% in January.
Mr Hunt confirmed the second cut, which is set to impact 27 million workers, on March 6 during his Budget announcement in the Commons. Workers with the tax code 1257L can expect to pay less tax from April 6. How much you will save depends on your earnings - but the Government says the two tax cuts combined will see the typical worker earning £35,000 save £900 in tax a year. 1257L is the standard tax code for most workers, but it can be adjusted if you have overpaid or underpaid tax.
However, if your payslip shows NT, you won't receive £900 this year. This is because you haven't reached the £12,570 threshold yet and aren't paying tax on your income to qualify for a tax refund. The government's new policy is set to slash the rate of National Insurance contributions for employees earning between the Class 1 primary threshold and upper earnings limit. It's also targeting a reduction in the main rate of Class 4 National Insurance contributions for self-employed individuals earning between the lower profits limit and upper profits limit.
The government has clarified: "As a result of this measure, an average employee on £35,400 will receive a tax cut of over £450 per year from April 2024. An average self-employed person on £28,000 will see a tax cut of £310 a year and over 2 million individuals will benefit. Actual impacts for individual taxpayers will vary according to individual circumstances."
Self-employed Brits have just weeks left to submit tax return or risk £100 fine
HMRC sending letters to people owed £689
HMRC is dishing out letters to inform individuals if they've overpaid or underpaid tax - and you could find yourself in for a hefty refund.
A P800 should land on your doormat at the conclusion of each tax year.. Unlike the standard calendar year, the tax year spans from April 6 until April 5 the subsequent year.
A study by financial services firm Canada Life revealed that 31% of adults have been slapped with the incorrect tax code, with the average overpayment totalling £689.
If you're due cash back, you should be able to claim this online via GOV.UK using your Government Gateway user ID and password. If you don't stake your claim for a refund online within 21 days, HMRC will pop a cheque in the post for you.
Tax codes are utilised to indicate how much tax should be deducted from your pay or pension - however, millions of workers are assigned the wrong tax code each year. You can rewind as far as four tax years, meaning you can currently claim back as far as the 2019/2020 tax year.
But from April 6 onwards, you will only be able to go back as far as the 2020/2021 tax year. The most prevalent code is 1257L for those who have one job or pension - although not everyone will be on this. To locate your tax code, check your latest payslip, or your P45 if you've recently left your job.
GOV. UK has a dedicated webpage where you can view your tax code as well - to check it online, you'll need to register for a free government gateway ID. MoneySavingExpert offers a free tax code calculator that you can use to get a rough idea of whether your tax code is correct. While no tax calculator can definitively confirm if your tax code is right, it should give you a good indication. If you suspect your tax code is incorrect, you can reach out to HMRC for an investigation by dialling 0300 200 3300. If it turns out you've been underpaying tax, you would be in debt to HMRC as the unpaid tax would need to be reimbursed.
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