What's the truth?
In a recent poll about tax codes for agency workers, we uncovered a significant misunderstanding about who is responsible for determining tax codes when changing jobs or agencies. We get many questions about tax codes and who determines them, so we thought we would clear this up.
50% of respondents believed they (the employee) were responsible, 17% thought it was their employer’s duty, and 33% correctly identified HM Revenue & Customs (HMRC) as the responsible party.
The Truth about tax codes
Contrary to what half of our respondents believed, it is not the employee who determines their tax code. Neither is it the employer’s responsibility, as 17% of poll participants thought. The correct answer, as 33% of respondents knew, is that HMRC is responsible for determining and issuing tax codes.
When you change jobs or move to a new agency, HMRC uses the information they have about your income and circumstances to calculate and assign your tax code. This code is then communicated to your new employer, who uses it to deduct the correct amount of tax from your salary.
The role of your employer
While your new employer doesn’t determine your tax code, they do play a crucial role in the process. When you start a new job, your employer will use the tax code provided by HMRC or, if no code is available, a temporary code until HMRC issues the correct one. This is why it’s essential to provide your new employer with your P45 from your previous job or complete a starter checklist (formerly P46) if you don’t have a P45.
Your responsibility
Although HMRC determines your tax code, you have a vital responsibility in this process. It’s up to you to check that your tax code is correct and to notify HMRC if you believe there’s an error. This is crucial because an incorrect tax code can lead to paying too much or too little tax, potentially causing financial difficulties later on.
You can find your tax code on your payslip, P45, P60, or by logging into your personal tax account online. If you suspect your tax code is incorrect, it’s important to contact HMRC promptly. They can review your code and make any necessary adjustments.
Why the confusion?
The misunderstanding revealed in our poll is understandable. Tax matters can be complex, and the responsibilities of different parties aren’t always clear. Some reasons for the confusion might include:
- The active role employees play in checking and reporting issues with their tax code.
- The involvement of employers in implementing the tax code and deducting tax.
- The fact that personal circumstances, which only the employee knows in detail, affect the tax code.
The importance of understanding
Knowing who determines your tax code and understanding your role in the process is crucial for several reasons:
- It ensures you’re paying the correct amount of tax.
- It helps you avoid unexpected tax bills or refunds at the end of the tax year.
- It empowers you to take action if you suspect an error in your tax code.
Conclusion
While HMRC is responsible for determining your tax code when you change jobs or agencies, it’s a collaborative process involving you and your employer. HMRC calculates the code, your employer implements it, and you are responsible for checking its accuracy and reporting any issues.
By understanding these roles and responsibilities, you can ensure that your tax affairs are in order, avoiding potential financial surprises down the line.
Remember, if you’re ever unsure about your tax or your pay or any other aspect of your employment, don’t hesitate to reach out to your agency or seek advice from organisations like Citizens Advice.
In the world of agency work, knowledge truly is power. Stay informed, ask questions, and ensure you’re receiving everything you’re entitled to. After all, everyone deserves their fair share of rest and relaxation! You can view more commons questions on our FAQ page or follow the below links:
