Martin Lewis has provided a lot of advice on furlough rules as the country has been forced to gets used to a “new normal”. Many people will now be receiving their first payslips of the current tax year and with all the new rules in place, it is important that workers understand their tax code.
As Martin explained: “Your tax code is a series of letters and numbers that tell your employer what tax to deduct.
“Now you’ve likely got the first payslip of the tax year (which began in April), and with at least six million on furlough alone with reduced pay, it’s vital to check the code’s right.
“If wrong, you’re overpaying or underpaying (where you’d get a big shock when they ask for it back)”
Thankfully, the government has tools in place which can help people easily check on their tax arrangements.
A tax code will normally start with a number and end with a letter.
According the government, “1250L” is the tax code currently used for most people who have one job or pension.
It is up to an employer to make sure that the correct amount of tax is deducted but because of complex furlough situations, it may be the case that tax errors may emerge.
It’s possible that people could end up paying too little or even too much tax.
Income above the personal allowance will be taxed in a tapering format.
Earnings between £12,501 and £50,000 will fall into the basic rate which is taxed at 20 percent.
There is a higher rate of 40 percent paid on income between £50,001 and £150,000.
People with taxable income over £150,000 will pay an additional rate of 45 percent.
Tax codes can be complicated but Martin Lewis provides a free to use tax code calculator on his website people can use to check that they’re on the right code.
There is also a guide provided on how to handle underpaid and overpaid tax situations.
Published at Thu, 07 May 2020 05:20:00 +0000