Britons on the wrong tax code have overpaid £5.8 billion to HM Revenue & Customs, according to Canada Life.
Almost a third (31%) of UK adults who have checked their tax code found that they have been on the wrong code at some point, with 6% finding that they have been on the wrong code in the last 12 months, Canada Life said.
Three quarters (75%) of those who have found they were on the wrong code have been overpaying by an average £689, or £5.8 billion.
The findings also showed that nearly one in five UK adults (18%) have never checked their tax code and those who have done so only do so on average, every 16 months. Among all UK adults, less than half (42%) know that it is currently correct. Moreover, 39% don’t know what any of their tax code means, leaving them at a disadvantage in the first place, Canada Life warned.
The findings prompted calls for people to check their code and understand the tax rules around claiming back overpaid tax, with over two thirds (69%) admitting they do not know the rules around overpaid tax.
John Chew, tax and estate planning specialist at Canada Life, said: “Understanding your tax code is vital to ensure you’re paying the right amount of income tax. Those who are not on the right code may find themselves out of pocket. If it’s wrong, you may end up contributing more or less than you’re supposed to. So, if you haven’t checked your tax code recently, now is a good time.
“If you think your tax code is wrong, you need to contact HMRC directly. You can check HMRC has your correct, up to date information online. If you’re on the wrong code you might need to update your employment details, or whether you’ve had a recent change in income.”
The most common tax code is 1257L and is used where someone has one source of income, either through a job or pension. People can earn £12,570 a year before they have to start paying income tax.
