- Almost a third of UK adults who have checked their tax code (31%) have found that they have been on the wrong one at some point
- One in six (15%) UK adults do not know if they are on the right tax code
New research1 from Canada Life can reveal that almost a third (31%) of UK adults who have checked their tax code found that they have been on the code at some point. With 6% finding that they have been on the wrong tax code in the last 12 months.
Three quarters (75%) of those who have found they were on the wrong tax code have been overpaying HMRC by an average of £689, or £5.8 billion2 as a nation.
The findings also show that nearly one in five UK adults (18%) have never checked their tax code. Those who have checked their tax code have only done so on average once every 16 months. Brits most commonly check for no specific reason (19%) or out of habit (17%), but others have done so due to a job change (12%) or having been on the wrong tax code before (8%).
Among all UK adults, less than half (42%) know that it is currently correct. Moreover, almost four in ten (39%) don’t know what any of their tax code means, leaving them at a disadvantage in the first place.
Over two-thirds (69%) say they do not know the rules around claiming back overpaid tax. Less than one fifth have employed professional services to sort their personal tax (18%). This is down from three in ten from 2023’s study (29%)
John Chew, tax and estate planning specialist, Canada Life, comments:
“Your tax code is made up of a series of numbers and letters and HMRC uses this to work out how much income tax you pay. 1257L is commonly used where you have one source of income, either through a job or pension, and means you can earn £12,570 a year (your personal allowance) before you start paying income tax.
“You should have a different tax code for each income stream you receive, whether that is through work or via a pension. Your tax code can vary from the standard if you receive benefits from your job, such as a company car or healthcare. HMRC can also apply a different tax code if it wants to claim back tax you’ve underpaid.
“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(s) recently, now is a good time.
“If you think your tax code is wrong, you need to contact HMRC directly. Your employer (if relevant) won’t be able to do this for you. 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.
“If you have found you have been on the wrong tax code, you may be owed a rebate, or you may owe money to HMRC. HMRC may already be aware of this in which case you should be sent a tax calculation letter (a P800 form) or a Simple Assessment letter by the end of the tax year (April 5th), which will tell you how to pay HMRC or reclaim overpaid tax. You will only be sent one of these forms if you are employed or receive a pension.
“Remember, there are time limits to reclaim overpaid income tax, which is four years from the end of the tax year in which you are trying to claim so if you are in any doubt, the earlier you contact HMRC, the better.”
ENDS
Notes for editors:
- Source: Research conducted by Opinium among 2,000 UK adults, with fieldwork conducted between 19th and 22nd March 2024.
- On a nat rep survey of 2000 UK adults, 317 know how much money they overpaid when on the wrong tax code. 317 / 2000 * 52890000 (UK adult population) = 8383065 (shorthand 8.4 million). £689 * 8383065 = 5775931785 (shorthand £5.8 billion).
Enquiries:
Press enquiries should be directed to:
Paul Keeble, Canada Life, paul.keeble@canadalife.co.uk
About Canada Life:
Canada Life is part of a group of companies controlled by Great-West Lifeco Inc., a diversified financial services holding company headquartered in Winnipeg, Canada. Through its subsidiary companies, Lifeco has operations in Canada, the United States, and Europe. Great-West Lifeco and its insurance subsidiaries have received strong ratings from major rating agencies. Great-West Lifeco has over 42 million global customer relationships worldwide and £1.52trillion assets under administration (as at 31 December 2023).
Canada Life Limited began operations in the United Kingdom in 1903 and looks after the retirement, investment and protection needs of individuals and companies alike. As well as providing stability and security through its individual contracts, Canada Life Limited has grown to become the leading provider of competitively priced group insurance solutions. Canada Life acquired Retirement Advantage on 3rd January 2018 for an undisclosed sum. The acquisition added over 30,000 retirement income and equity release customers and more than £2 billion of assets under management including a £1.5 billion block of in-force annuities to Canada Life.
Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority. Canada Life International Assurance Limited and Canada Life International Assurance (Ireland) DAC are authorised and regulated by the Central Bank of Ireland.
- Canada Life MI & Swiss Re, 2024