An incorrect tax code can have a serious impact: those overpaying risk cashflow problems, and those who are underpaying are likely to be hit with a hefty bill one day.

“Tax codes are based on information derived from the last submitted tax return,” said Andrew Shaw, tax partner at Kingston Smith LLP.

“However, as we all know, people’s situations do change from year to year. Everyone needs to take responsibility for checking their own tax codes to ensure they reflect their current circumstances.”

Shaw said the most common reasons for incorrect codes included where company benefits changed  — such as the introduction of a company car, and where HM Revenue & Customs continued taking a previous year’s underpayment.

Workers should check tax codes, reading the allowances given, followed by deducted items, and checking benefits deductions are realistic.

Shaw added: “For taxpayers who are required to file self-assessment tax returns, any errors in code will ultimately come out in the wash.

“But this year, more than ever before, people who don’t check their tax codes may suffer serious cashflow problems by paying out unnecessary tax.”