Martin Lewis has warned millions of UK employees they could lose thousands of pounds if they fail to check their tax code.
The Money Saving Expert founder said anyone earning above £12,570 should review their details immediately, issuing the alert on his podcast.
He said tax code errors are widespread and can have serious financial consequences.
According to Mr Lewis, the responsibility for spotting mistakes lies with the individual taxpayer.
“Do you know what your tax code is? If you’re an employee, you need to, because millions of them are wrong each year.
“And if they are wrong, legally it’s your responsibility – not your employer’s and not HMRC’s – to ensure it’s correct.”
HM Revenue and Customs (HMRC) uses tax codes to tell employers and pension providers how much income tax to deduct.
Each code is made up of numbers and letters, with 1257L the most common. Mr Lewis explained how to interpret it: “Take the numbers, 1257, add a zero to the end – you’ve now got £12,570.
"That’s how many pounds you can earn each year before you start paying income tax.”
The letter at the end of the code indicates the type of tax allowance applied. For 2025/26, the standard personal allowance remains £12,570.
Martin Lewis sounds alarm over HMRC mistake
| ITV/GETTYEarnings above that are taxed at 20 per cent up to £50,270, with higher rates applying beyond that threshold.
Mr Lewis said mistakes can lead to workers either overpaying or underpaying tax, and both scenarios can cause problems.
“It could also mean you’re paying too little tax,” he warned.
“Sounds good. It isn’t.”
Underpayments are eventually recovered by HMRC, which can result in large and unexpected bills.
“At some point they will catch up and make sure you pay the tax that you owe,” he said. “You could be hit, slapped across the face with a big tax bill and not have the cash to pay it.”
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Tax code checks are worthwhile
| GETTYTax code errors often arise when circumstances change, such as starting a second job, switching employers or receiving new taxable income.
Mistakes can lead to overpayments that are not automatically refunded, or delayed demands for unpaid tax.
Tax codes appear on payslips and in letters or emails from HMRC.
Workers can also check their current code through their Personal Tax Account on the GOV.UK website.
Mr Lewis urged people to make checking their tax code a routine task, advising employees to review it each year.
Even if a tax code being wrong isn't your fault, you'll still be liable to ensuring it's correct
| GETTYHe said those who have never checked their code should do so immediately, highlighting the availability of free online tax code calculators to help identify potential errors.
Several letters commonly appear in tax codes.
- L indicates entitlement to the standard personal allowance.
- M and N relate to Marriage Allowance transfers.
- K is used when untaxed income exceeds the personal allowance.
- W1, M1 or X are temporary emergency codes, often applied when someone starts a new job.
HMRC advises taxpayers to inform the department promptly when their circumstances change to help ensure codes remain accurate.
Mr Lewis said failing to check a tax code can have long‑term financial consequences and urged employees to take responsibility for ensuring HMRC holds the correct information.