Skip to content

Man and woman at table

Are you paying the wrong amount of tax? Many people are, and even Her Majesty’s Revenue & Customs (HMRC) sometimes slips up. 

So, whether it's having the wrong tax code, not submitting your tax return or other errors, read our list of 10 common tax mistakes below to ensure you’re not giving the taxman more than you should be.

1. Missing out on allowances

If you were born after 5 April 1948, the amount of income you can have tax-free for the year 2014/15 is £10,000. This is called your personal allowance. Until 2013, there was a higher personal allowance for people aged 65 and over, but this is no longer available for people turning 65 after 5 April 2013.

If you're 65 or over and have been getting a higher allowance due to your age, this will now be frozen at £10,500 for people aged 65-74 this year, and at £10,660 for people aged 75 or over this year.

2. Not claiming Blind Person’s Allowance

You get an extra allowance of £2,230 if you are registered blind, or if you live in Scotland or Northern Ireland and your sight is too poor for you to do any work for which eyesight is essential.

Once you've registered as a blind person with your local authority, you need to phone HMRC on 0845 366 7887 and ask for Blind Person's Allowance. It is not added automatically.

3. Not working as a team

Couples can save tax by giving investments to the partner who pays the lower rate of tax – but it has to be a real gift, not a gift in name only. If you are married or a civil partner and one of you was born before 6 April 1935, you also get Married Couple’s Allowance, cutting your tax bill by between £314 and £816.50 a year.

4. Not transferring unused allowances

If your income is too low to use up all your Married Couple’s Allowance or Blind Person’s Allowance, you can transfer the unused part to your husband, wife or civil partner. Contact your tax office for more information.

5. Paying tax when you don’t need to

Income tax at 20% is taken off the interest on your savings account at a bank or building society before you get it.

If your total income – including pension, earnings and interest – is less than your allowances, fill in form R85 to get your interest paid with no tax taken off. Your bank or building society can provide this form.

6. Not claiming back overpaid tax

If you’ve paid too much tax because you’ve failed to claim an allowance or tax relief, or because too much tax has been deducted from your income, you can usually claim tax back within four years of the end of tax year in question. Ask your tax office for form R40.

7. Not checking your tax code

Your tax code tells your pension company or employer how much pay you can be paid free of tax – tax is taken off the rest. Your tax office will write to you from time to time explaining how the code was worked out.

Check they have given you the right allowances, that the amount of pension or other income shown is correct, and query anything that you don’t understand.

8. Not informing HMRC when your working hours change

If you change your hours, tell HMRC. They may need to adjust your tax code. Be particularly careful if you have a job as well as a pension - you get a code for each source of income, but it’s common for the wrong amount to be deducted.

9. Forgetting to tell HMRC that you're soon to retire

Make sure your tax office knows in good time if you expect to start receiving a pension in the next few months so that they can sort out your tax code.

10. Putting off your tax return

If you are sent a tax return for the tax year, you must fill it in by 31 October, or by 31 January if you do it online. The tax must be paid by 31 January each tax year.

New, tougher, penalties make missing the deadline expensive – there’s an automatic £100 penalty, plus higher penalties after a further three months.

All figures are for 2014-15 tax year, which started on 6 April 2014.

Further information

For more information: Call Age NI Advice: 0808 808 7575