Martin Lewis has issued an urgent warning to all households ahead of the start of the new tax year on April 6.
The Money Saving Expert founder said many people could be missing out on thousands of pounds. As part of the cost of living crisis episode of his Money Show Live earlier this month, Mr Lewis explained how tax rules meant people should act now to avoid losing out.
Under tax rules you can only claim back four years, so if you’re owed money from the 2017/18 financial year, you should apply now or you will lose the opportunity. During the ITV show, Martin highlighted three “big categories” where many people may be able to claim backdated payments from HMRC.
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Millions of people, he said, are on the wrong tax code. And it’s not your employer’s or HMRC’s responsibility to check – it’s yours.
Martin said: “This is the little code that tells your employer how much tax to take off you. It’ll be a number like ‘1257L’. If it’s wrong, and you’re overpaying, well, then they’ll owe you money.”
If it is wrong and you’re underpaying, you’re “going to get a big demand”. There are free online tools to check your tax code and Mr Lewis advises doing this “quickly”. Go as far back as the 2017/18 tax year to see if you are owed any money.
Martin’s co-presenter Angelica Bell said a man named Darren emailed in to say he received a cheque for £475 after his employer changed his tax code.
Another key area where people may be missing out on cash they’re entitled to is the marriage tax allowance. This is if you are a non-taxpayer and are married to a 20% rate taxpayer.
Martin explained: “The non-taxpayer can give 10% of their tax free allowance to the taxpayer which means they’ve got the amount of money that they would have paid tax on that they aren’t now. The gain for this a year is £252, but this is back-dateable if you were eligible, so you need to do it now or you will lose the £230 pounds from 2017/18.
“And once you do claim, by the way, you needn’t claim again, you’ll get it automatically, but you need to tell them if you’ve stopped becoming eligible. I should say it’s if you’re married or in a civil partnership, but I’m afraid you don’t get this for cohabiting.”
Angelica shared another success, saying a woman called Sue had emailed in and thanks to Martin’s marriage tax allowance advice she received a £960 cheque.
Finally, Mr Lewis told viewers they could be missing out on PPI tax. He admitted PPI reclaims are long gone “to an extent”, but that people could claw back some tax they paid in the year they were given a pay-out.
He said: “What you get with [a pay-out] is you get an extra 8% statutory interest, which is designed to put you back in the position you would have been had you not been mis-sold. Now that extra is taxed as savings.
“But unlike normal savings, which are given to you without any tax taken off – here 20% of it is automatically deducted. Now the vast majority of people don’t need to pay tax on savings because basic rate taxpayers can earn £1,000 worth of interest a year without it being taxed, higher rate 40% taxpayers – £500 a year without it being taxed.
“But they take the tax off automatically. So if that’s you, you reclaim for the tax year you got the pay-out in via an R40 form. Again, there’s free help online because it can be complicated to fill in.” He then advised anyone considering making such a claim to “get their skates on”.
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