As the new financial year begins in the UK, many households may soon receive new tax codes from HM Revenue and Customs (HMRC). This annual adjustment typically affects individuals whose financial circumstances have changed over the past year, although for most, tax codes will remain the same.
The basic Personal Allowance for the 2025 to 2026 tax year has been set at £12,570, meaning individuals start paying income tax once they earn above this threshold. The starting point for Pay As You Earn (PAYE) is £242 per week or £1,048 per month. The most common tax code, 1257L, applies to those with the standard tax-free personal allowance attached to their employment.
According to Tax Aid, "Codes for the 2025/26 tax year, which begins on April 6, 2025, are currently being issued. You should therefore take action to review your tax code to ensure the tax deducted is as accurate as possible." This guidance is particularly crucial for those with multiple jobs or pensions, as discrepancies in tax codes can lead to incorrect tax deductions.
The numbers in an employee’s tax code indicate how much tax-free income they are entitled to for the year. For instance, an employee with the tax code 1257L can earn £12,570 before being taxed. If they earn £27,000 annually, their taxable income would be £14,430.
In addition to new tax codes, HMRC is also sending out personalized letters, known as P800 forms, to thousands of households across the UK. These letters target individuals earning between £23,000 and £52,000 annually, alerting them to potential underpayments of tax. If HMRC believes someone has underpaid, they will receive a P800 letter detailing the amount owed and the payment process.
Approximately seven million P800 End of Year Tax Calculation Notices are dispatched each year, and they serve as an important tool for taxpayers. These letters inform recipients whether they owe additional tax or are eligible for a refund, providing a detailed breakdown of the tax calculations involved. In many cases, recipients do not need to contact HMRC after receiving a P800 notice unless they spot an error.
Individuals may receive a tax calculation letter if they were placed on the wrong tax code or if their employment situation changed—such as finishing one job and starting another within the same month. Additionally, those who receive Employment and Support Allowance or Jobseeker’s Allowance from the Department for Work and Pensions (DWP) may also find themselves receiving these letters.
As the tax year closes, it becomes essential for individuals to address any underpayments promptly. If someone discovers they have underpaid due to an incorrect tax code, they are obligated to repay the owed amount. The Express reports that, "To prevent a heftier bill in the future, addressing any underpayments promptly is crucial." Financial experts emphasize the importance of reviewing tax codes regularly, as any delays in rectifying underpayments can lead to more significant financial repercussions.
Martin Lewis, founder of Money Saving Expert, notes that in most cases, individuals will have to repay any underpaid taxes. "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," he explained. This highlights the importance of maintaining accurate records and ensuring that tax codes are correct.
HMRC's official stance is that it is each individual’s responsibility to verify their tax code. However, there are circumstances where individuals may not have to pay the tax bill if their code was incorrect. Lewis adds, "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." The A19 rule allows individuals to request that HMRC write off the tax owed if the underpayment was not their fault, but it requires that the underpayment must have occurred more than 12 months prior to be effective.
In summary, as HMRC begins sending out new tax codes and P800 letters, individuals are encouraged to review their tax situations carefully. With the potential for changes in tax codes and the issuance of P800 forms, being proactive can help prevent unexpected tax bills and ensure that taxpayers are informed about their financial responsibilities.
