3 Costly Tax Errors To Avoid

How I Lost Over £1,500 to Taxes!

Last month, my income tax alone was almost £1,500—all because of three avoidable mistakes!

If you want to keep more of your money and avoid unnecessary tax deductions, this article will show you exactly what I did wrong and how you can prevent the same mistakes.

Mistake #1: Using the Wrong Tax Code

What Happened?

My employer used the wrong tax code, meaning I initially paid less tax than I was supposed to.

Later, HMRC corrected it, and I had to pay the difference through increased deductions every month.

How to Avoid This Mistake

✅ Always check your tax code on your payslip or through the HMRC app.

✅ Common tax codes to watch for:

• 1257L – Standard for most employees.

• BR (Basic Rate) – Used for second jobs or emergency tax (can be incorrect).

• D0/D1 – Higher tax rate codes for additional income.

💡 Tip: If your tax code looks wrong, call HMRC immediately to correct it before it affects your salary!

Mistake #2: Not Declaring My Agency Work as a Second Job

What Happened?

I started taking agency shifts, but my agency didn’t treat it as a second job.

This meant I was initially taxed less, but once HMRC corrected it, they spread the difference across my remaining paychecks, increasing my deductions.

How to Avoid This Mistake

✅ When signing up for agency work, always tick ‘Second Job’ on your tax application form.

✅ Your second job is taxed differently:

• Main job: Gets the personal allowance (£12,570 tax-free).

• Second job: Is taxed at 20% (BR), 40% (D0), or 45% (D1), depending on your income.

💡 Tip: If you’re not sure how your second job is taxed, use the HMRC online tax checker or contact them for clarification!

Mistake #3: Not Collecting My P45 Before Changing Jobs

What Happened?

When I changed jobs, I didn’t get my P45 on time. My previous employer delayed sending it, and as a result:

• HMRC treated my new job as a second job.

• I was taxed at 41% (Scotland’s higher rate).

How to Avoid This Mistake

✅ Always request your P45 immediately when leaving a job.

✅ If your employer delays, contact HMRC directly to update your tax record.

✅ If you don’t have a P45, ask your new employer to use a ‘Starter Checklist’ to prevent emergency tax.

💡 Tip: No P45? No problem! A Starter Checklist ensures you’re on the correct tax code from day one.

Final Thoughts – What Can You Learn from My Mistakes?

🚨 Here’s a quick recap to help you avoid losing money to tax errors:

✔ Check Your Tax Code Regularly – Use the HMRC app or check your payslip.

✔ Declare Your Second Job Correctly – Mark it as ‘Second Job’ to avoid unexpected deductions.

✔ Always Collect Your P45 When Changing Jobs – It ensures your new employer applies the correct tax code.

Have You Faced a Similar Tax Issue?

If you know HMRC, you know they won’t cheat you—but you also can’t cheat them! You will always pay back what you owe.

📌 Have you ever had a tax issue like this? How did you handle it? Drop a comment below and let’s discuss!

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🔄 Share this post so more people can avoid these tax mistakes!

FAQs – Common UK Tax Questions

1. Why am I paying too much tax in the UK?

• Your employer may have used the wrong tax code, or you could be on emergency tax.

2. How do I check if my tax code is correct?

• Look at your latest payslip or use the HMRC app. If in doubt, call HMRC on 0300 200 3300.

3. How can I avoid emergency tax in the UK?

• Submit a P45 from your previous job or ask your new employer to fill out a Starter Checklist.

4. How do I update my tax code with HMRC?

• Update your employment details on the HMRC app or call HMRC customer support.

5. Do I need a P45 when changing jobs?

• Yes! It ensures your new employer uses the correct tax code. If you don’t have one, complete a Starter Checklist.

6. How does second job tax work in the UK?

• Your second job won’t get the tax-free personal allowance, meaning you pay 20% (BR), 40% (D0), or 45% (D1) tax on all earnings.

7. Why is my payslip tax so high?

• Possible reasons:

• Wrong tax code

• No P45 submitted

• Extra income from multiple jobs

8. Can I claim a tax refund?

• Yes! If you’ve overpaid tax, claim a refund via HMRC’s online portal or call them directly.