Top 10 Signs Your Employer Has the Wrong Tax Code for You

Hook: Are you losing money to the wrong tax code?

If you have limited time but a lot at stake—savings, a side hustle, crypto gains, or a mortgage—you can’t afford to be quietly overtaxed. In 2026, with more people holding multiple income streams and HMRC shifting further into digital-first enforcement, getting your tax code wrong can drain your cashflow or trigger unexpected bills.

Experts like Martin Lewis sounded the alarm in late 2025 that millions of people could be on the wrong tax code. This list identifies the top 10 signs your employer may be using the wrong tax code — and gives immediate, practical steps to fix it whether you’re a full-time employee, a freelancer, or a side-hustler.

Why this matters now (2026 context)

Recent trends through late 2025 and early 2026 increased the risk of coding mistakes: more workers have multiple employers or mixed PAYE and self-employment income; payroll systems now pull real-time HMRC data more often; and HMRC’s online guidance and automated checks have expanded. That means mistakes get propagated faster — but also that corrections can be quicker if you act.

Key takeaways: modern payroll connects to HMRC, but human errors, delayed notifications, or miscommunicated benefits still create PAYE errors. Spotting signs early preserves refunds and prevents surprise tax demands.

Top 10 signs your employer has the wrong tax code for you (with immediate steps)

1. Your payslip shows an unexpected code: BR, D0, 0T, or K

What it means: Codes like BR (basic rate), D0 (higher rate), or 0T (no allowances applied) are often used for second jobs, emergency starters, or when HMRC hasn't supplied your personal allowance. K codes indicate you owe tax on benefits or previous underpayments.

Why it happens: Payroll used a default or emergency code because HMRC had no up-to-date record or because you have other untaxed income.

Martin Lewis: “Check your tax code now — the consequences of leaving errors unattended are real.”

Immediate steps:

• Compare the code on your payslip to the code shown in your HMRC Personal Tax Account.
• Ask payroll for a coding explanation — request the exact reason payroll used that code.
• If you have another job, confirm which employer is using your main personal allowance.

Examples:

• Full-time: Your new starter payroll gave you 0T and you're being taxed at the highest rate.
• Side-hustler: Your main employer is still using your full allowance even though you now have a second PAYE job.
• Freelancer (on umbrella): The umbrella company applied BR to all income, ignoring your allowance.

2. You’re on emergency tax or ‘week/month 1’ (non-cumulative)

What it means: Non-cumulative coding treats each pay period in isolation, so you miss your personal allowance if it’s not assigned.

Why it happens: Usually used for temporary starters or when HMRC sends a temporary code until they process details.

Immediate steps:

• Tell payroll you believe you should be on cumulative coding.
• Check HMRC’s online message centre for a coding notice—if none, contact HMRC.
• Keep payslips and P45/P60 ready to show your history.

Examples: Emergency tax can wipe several hundred pounds from a first month’s pay for a full-time starter or side-gigker who changed jobs mid-year.

3. Deductions that don’t match your declared benefits (pensions, company car, medical cover)

What it means: Taxable benefits should be reflected in your code; if they’re not, you may receive a surprise bill later.

Why it happens: Employer reported a benefit late, or payroll misclassified a benefit as non-taxable.

Immediate steps:

• Check your P11D (or equivalent) and compare reported benefits to what’s on your coding notice.
• Ask payroll for corrections if a benefit was reported incorrectly.
• If payroll refuses, escalate to HMRC with supporting documents.

Example: An employee enrolled in a new salary-sacrifice pension notices their tax code hasn’t changed to reflect lower taxable pay.

4. Student loan or postgraduate loan deductions appearing incorrectly

What it means: Student loan deductions depend on plan type and thresholds. Wrong codes can cause double deductions or missed repayments.

Why it happens: Payroll using a default deduction order or incorrect plan type (Plan 1, Plan 2, Plan 4, or postgraduate).

Immediate steps:

• Check the student loan plan HMRC has recorded in your Personal Tax Account.
• Ask payroll to stop/start deductions only after HMRC confirms the correct plan.

Example: A freelancer who picks up a PAYE day job finds their second employer is deducting student loan at the wrong rate.

5. You see a K code but you haven’t had unpaid tax or taxable benefits

What it means: K codes are adjusted down your allowance because HMRC thinks you owe tax — often due to unreported income or a previous underpayment.

Why it happens: HMRC may have used data from self-assessment or a previous employer and applied a balancing adjustment.

Immediate steps:

• Check your HMRC Personal Tax Account for any underpayment notices or messages.
• If you disagree, gather payslips and bank records and contact HMRC to challenge the reason.

Example: A side-hustler who didn’t declare small freelance earnings in a prior year suddenly gets a K code because HMRC matched bank records.

6. Your personal allowance moved to another employer unexpectedly

What it means: If your personal allowance is being used by a second job, your main job gets taxed without it.

Why it happens: You or HMRC may have designated a different job as the “main job” or failed to update your employment status.

Immediate steps:

• Decide which employer should have the main allowance and ask payroll to apply it accordingly.
• Confirm changes through HMRC’s online tools.

Example: A teacher who picked up an evening job finds the side job has the allowance and their main salary drops net pay.

7. You receive a tax code that omits marriage allowance, blind person’s allowance, or other entitlements

What it means: Missing allowances reduce your tax-free income and increase tax paid.

Why it happens: You didn’t claim the allowance, HMRC’s records are outdated, or payroll never applied it.

Immediate steps:

• Apply for eligible allowances via HMRC or confirm payroll has correct records.
• Keep proof (marriage certificate, blind person’s certificate) ready.

Example: A spouse who transferred Marriage Allowance assumes payroll applied it automatically and loses several hundred pounds in a year.

8. You’re being taxed twice on the same income (PAYE + Self Assessment)

What it means: HMRC sometimes triggers PAYE deductions and also includes income in self-assessment, causing apparent double-taxation until reconciled.

Why it happens: With multiple income streams and more robust cross-checking in 2026, records get matched and provisional duplicates appear until HMRC updates records.

Immediate steps:

• File accurate Self Assessment with all PAYE income included; HMRC will reconcile amounts.
• If you’ve overpaid, claim a refund via self-assessment or ask HMRC to adjust your tax code for the following year.

Example: A consultant with a PAYE day job and freelance invoices receives a higher PAYE deduction while HMRC still expects self-assessment payment.

9. Your coding notice contradicts your P60/P45

What it means: The coding notice is HMRC’s official explanation of your tax code. If it doesn’t match employer documents, errors can follow.

Why it happens: Payroll and HMRC have asynchronous records, or HMRC issued a correction that payroll ignored.

Immediate steps:

• Always keep the latest P60/P45 and the coding notice side-by-side when discussing with payroll.
• Request that payroll update your records to match the coding notice — or get HMRC to issue a revised notice.

Example: A full-time worker’s payroll splits bonuses across pay periods, but HMRC’s coding notice assumes annualised pay — leading to mismatch.

10. You’ve moved countries, changed residency, or reported overseas income — and the code seems unchanged

What it means: Tax status changes (non-resident, split-year, or foreign income) should alter your tax code. If they don’t, you may be over- or undertaxed.

Why it happens: HMRC needs updated residency or foreign income data; payroll may not be told.

Immediate steps:

• Report residency changes via your HMRC Personal Tax Account or form P85 if leaving the UK.
• Tell payroll about your status change and provide HMRC confirmation.

Example: A remote worker returning to the UK finds their employer continued to apply a non-resident code, under-reporting tax at source.

How to correct a wrong tax code: immediate and follow-up actions

Follow this practical checklist the moment you spot any warning sign above:

1. Compare documents: Payslip vs. coding notice vs. P60/P45 vs. HMRC Personal Tax Account.
2. Ask payroll: Request a written explanation of the code and why it was applied.
3. Use HMRC digital tools: Log into your Personal Tax Account; send HMRC a message or call their helpline if there’s an obvious error.
4. Keep records: Save payslips, contracts, invoices, P60s, P45s, and any messages — these prove your case.
5. Claim refunds and adjustments: If you’ve overpaid, HMRC can usually refund or adjust your code to return excess tax in subsequent pay periods; for larger or older overpayments, ask for a direct refund via your Personal Tax Account or Self Assessment.
6. File Self Assessment if needed: For freelancers and side income, ensure you file a Self Assessment return on time — this is often the fastest way to reconcile complex income and trigger a refund.
7. Seek professional help: If the issue is complex — e.g., overseas income, multiple benefits, pension coding — consult a chartered tax adviser.

Special notes for freelancers, side-hustlers and umbrella/agency workers

Freelancers and side-hustlers are particularly exposed to coding issues because income can arrive both through PAYE and outside it.

• If you run irregular freelancing alongside a PAYE job, declare your earnings promptly in Self Assessment — don’t rely solely on payroll to balance taxes across incomes.
• Umbrella company workers: Confirm whether the umbrella used your personal allowance or applied BR across the board. Mistakes here are common and fixable if you provide the umbrella with correct HMRC notices.
• Side income thresholds: In 2026 the trading and property allowances remain popular for small earners—use them if eligible, but confirm with HMRC how they interact with PAYE coding.

What to expect after you ask for a correction

HMRC and payroll systems tend to react quickly in the digital era, but timelines vary:

• Payroll correction: Employers can often update codes within a pay period—ask for the effective date in writing.
• HMRC adjustments: If HMRC needs to issue a new coding notice, expect a short processing delay. In many cases corrections appear within days to a few weeks.
• Refunds: Small refunds may be applied via your pay; larger historical overpayments can be refunded directly via HMRC or appear as a credit in Self Assessment.

If you’re waiting and worried about a bill, ask for a timeline and get it in writing.

Real cases — practical examples

Case A: Full-time nurse

Situation: Started a second job as a night-shift agency nurse. Moments after the second job started, payroll used BR code and taxed both jobs as if no allowance existed.

Action: Nurse checked HMRC Personal Tax Account, found allowance assigned to main employer, asked the agency payroll to apply emergency correction, then requested HMRC reissue a cumulative code. Net pay returned within two pay periods and a small refund appeared in the following month.

Case B: Freelancer with side income

Situation: Freelance designer took a PAYE project. The client paid via an umbrella that applied BR; HMRC still expected self-assessment payments from freelance invoices.

Action: Designer filed Self Assessment, declared PAYE income, and requested HMRC reconcile. Overpayment was refunded the next tax year and the coding notice was corrected so the umbrella applied the allowance.

When to escalate: HMRC, tribunal, or tax adviser?

Most coding issues are fixed by talking to payroll and HMRC. Escalate if:

• HMRC insists you owe tax but can’t show records.
• Your employer refuses to correct a payroll error backed by HMRC coding notices.
• Your situation involves complicated foreign income, crypto disposals, or pensions where a professional review is necessary.

Final checklist: 6 immediate actions today

1. Open your HMRC Personal Tax Account and check your current tax code.
2. Compare it to your latest payslip and P60/P45.
3. If you see a warning sign above, contact payroll and request an explanation in writing.
4. If payroll can’t resolve it, contact HMRC via your Personal Tax Account or phone.
5. File Self Assessment for the tax year if you have side income or freelance earnings.
6. Keep digital copies of everything and set a calendar reminder to re-check your code when your employment status changes.

Closing: Protect your income in 2026

Payroll is more connected than ever — that’s good when data is correct and fast to change. But the proliferation of multiple jobs, gig income, pensions, and digital reporting means small errors can compound. Spot the tax code signs early, act with the checklist above, and reclaim money that’s rightfully yours.

Need help now? Start by checking your HMRC Personal Tax Account, then contact your payroll department. If the problem is complex, consult a chartered tax adviser — mistakes left unattended become harder to fix.

Call-to-action

Do the quick check now: log into your HMRC Personal Tax Account and compare the tax code there with your latest payslip. If anything looks off, follow the six-step immediate actions above — and share this article with a colleague or side-hustler who might also be losing money to the wrong tax code.

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