Understand your tax code
It's around this time of year that you start to receive numerous documents relating to tax; P60s showing how much you've earned, income statements showing interest and dividends on investments, and not forgetting the most mystical of all, the tax codes.
Tax codes are intended to notify firms who operate a Pay As You Earn (PAYE) system, such as employers and pension providers, the correct amount of tax to be deducted from individuals through the payroll system.
Royal London have produced a simple guide which explains the basics of tax and how tax codes work, including a few examples. You can download the guide at the following link:
Although the tax code system is quite sophisticated and should result in you paying the correct amount of tax, it is not always 100% correct. It is always worth calculating your total earnings and tax deducted at the end of the year using your P60s which you should receive.
A good Financial Plan will always include a full assessment of your gross income and tax due so that you can check against this that the tax you have paid to ensure it is correct.
As always, if you require assistance, do get in touch.
This article is intended for information purposes only and should not be considered to be a recommendation. This article is based on our understanding of current and draft pension and tax rules as at the date of this article. Please note that tax and pension rules are subject to change; if you are at all uncertain about the suitability of any option for your circumstances we strongly suggest you seek regulated personal financial advice. You should not take action solely on the basis of this article without seeking advice specific to your circumstances. Please get in touch to find out more.
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