Hundreds of thousands of people are losing money every year because of mistakes made by the tax office. And the terrible thing is that even if they make the mistake, you are the one who is blamed. So it’s more important than ever that you do what you can to make sure your tax details are correct and that you’re not paying too much.

Actually, if you do the checks now you could find that you’ve been paying too much tax for a few years. You can claim back up to six years of overpaid tax. So you could be in for a windfall! Just follow our seven steps to tax success and you will be richer – or at least protected from nasty future bills.

• Step one: Check your tax code
• Step two: Make sure you have your personal allowance
• Step three: Get the tax offices in contact with each other
• Step four: Avoid tax on your savings
• Step five: Give the taxman your correct address
• Step six: Check your tax details yourself
• Step seven: Complain, complain, complain

Step one: Check your tax code

Taxpayers on the wrong tax code can be overcharged, so check that your coding notice makes sense and you’ve been put in the right category. You should be able to find the code on your latest payslip.

Tax codes are made up of numbers (to tell your employer your tax-free allowance) and a letter to signify what type of taxpayer you are.  The letters are as follows:

To calculate your code, HMRC also deducts the value of your benefits from your personal allowance. So make sure they’ve included any taxable benefits you get at work like a company car or private medical insurance. If they haven’t included those now then you could find yourself slapped with an extra tax bill in a year or so when they suddenly realise that you owe them.

Step two: Make sure you have your personal allowance

The basic rate tax of 20% is charged on the next £34,370. Income over £34,370 is taxed at the higher rate of 40%.

Married couples who wed before 5 December 2005, where one partner was born before 6 April 1935, get an allowance – reducing their tax bill by 10 per cent of the Married Couple’s Allowance to which they’re entitled, which depends on the husband’s income. For those married on or after 5 December 2005 or are in a civil partnership, and one partner was born before 6 April 1935, the person with the higher income can claim Married Couple’s Allowance.

If you’ve earned less than your allowance in a tax year but you’ve still been taxed, contact your HM Revenue & Customs (HMRC) office to claim a rebate.

Step three: Get the tax offices in contact with each other

If you have more than one source of income, such as two part-time jobs for example, there may be two tax offices dealing with them. It’s quite possible that they don’t talk to each other and each has no idea about your other income. This means that you could either be being taxed twice or not at all.

Obviously, if you’ve been taxed twice then you’re owed money! Go get it – contact both tax offices and get them to sort it out between them. Sadly, if you haven’t been taxed at all, that doesn’t mean you can get away with it. It probably means that in a few years’ time you will get a big bill for the unpaid amount, so get it sorted now to avoid that shock.

Step four: Avoid tax on your savings

Step five: Give the taxman your correct address

The tax office has the wrong address for thousands of people so if you haven’t heard from them for over a year, get in touch and make sure they have your current address. There are two reasons why you should do this:

• They might have a nice rebate for you which they will send to you as a cheque. If they have the wrong address for you, you won’t get it.
• You might owe them money. If they think you do then they could have been writing to you at the wrong address for years. The money you owe them will be growing and growing during that time and if you don’t sort it out now you will get a truly nasty bill some way down the line, and possibly even a court case!

Step six: Check your tax details yourself

So check, re-check and check again that your tax code, your self-assessment form and all the details about you and your tax situation are right. Do ring up HMRC as often as you like to get them to help. Generally they are very helpful if you are genuine and respectful. Make sure you make a note of phone calls, when they were made, what was said etc, if your situation is a bit complicated. Ideally, follow up phone calls with a letter. Keep a paper trail. If things get really difficult then it is worth hiring an accountant to take over your affairs and argue your case with HMRC.

Step seven: Complain, complain, complain

If you are in dispute with HMRC and you believe you are right then persist, persist and persist again. Generally, if you demonstrate that you’re not willing to back down and will argue your case to the end they will concede. So if you truly believe you are right, stick to your guns!

Useful links

• HMRC
• Directgov
• Cash ISAs – how to choose the best