British workers overpay £8.2bn in tax due to wrong codes

  • Of those who have checked their tax code, over two fifths (43%) have been on the wrong one
  • Nearly three quarters (71%) of those were overpaying to HMRC
  • Only 38% are certain they are on the correct tax code
  • The average taxpayer who checked their code last did so two years ago
  • 8 million individuals don’t know the process for claiming back overpaid tax, and may have an unclaimed tax rebate as a result

More than two fifths (43%) of UK adults that have checked their tax code, have found they are on the wrong one, new research1 from Canada Life today reveals.

While a fifth (20%) of those who were on the wrong tax code were underpaying as a result, almost three quarters (71%) were overpaying. Those who paid too much gave the tax man £694 more than they were supposed to on average, with one in seven (13%) overpaying more than £1,000 - this totals £8.2bn in overpayments because of wrong tax codes2. With only a third (36%) of UK adults comfortable with how to claim back overpaid tax, this leaves around 34 million individuals who are unsure about the process, many of which could currently be owed an unclaimed tax rebate.

Conversely, two thirds of UK adults (67%) believe they are on the right tax code, but just 38% know this for certain and taxpayers who have checked their code have not checked their code for two years on average. However, nearly two in five (38%) say they have noticed a change in the amount they pay in income tax in the past three months.

Andrew Tully, technical director at Canada Life commented:

“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. And although overpaying means you should get a rebate - if and when it’s spotted - underpaying means you may have to pay HMRC a lump sum to make up the short-fall. If you are in doubt about your tax code, there are a variety of online resources to help you check, including salary and pension withdrawal calculators.

“If you think you are on the wrong tax code you can call HMRC directly. It’s worth keeping in mind 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. There are very limited exceptions to this, for example if HMRC has made an official error, so if you are in any doubt, the earlier you contact HMRC, the better.”

Reasons for not checking tax codes

The findings reveal that 16% have never checked they are on the right tax code. Of those who have not checked their code for five years, nearly one in five (18%) have not felt the need and one in six (15%) never think about it. Whereas a tenth (10%) trust HMRC to be taxing them the right amount, and 8% don't know how to check their code.

Reasons for checking tax codes

For the 48% of UK adults who have checked their tax code, the most common reason was out of habit (20%). The cost of living was the second most motivating factor (14%). One in ten (10%) check it every pay day, while 9% did so having been on the wrong tax code before. the same amount did so because they always check it before completing a self-assessment, or because they had changed jobs (both 9%).



Press enquiries should be directed to:

Lizzie Murray at Vested, 07914 698310,

Elle McAtamney at Canada Life, 07913568213,

Notes to editors:

  1. Source: Research conducted by Opinium among 2000 UK adults between 21-25 April 2023.
  2. Source: On a nationally representative survey of 2000 UK adults, 445 are UK adults who know how much they overpaid in tax the last time they were on the wrong tax code. 445 / 2000 * 52890000 (UK adult population) = 11768025 (shorthand 11.8 million). £694 * 11768025 = 8167009350 (shorthand £8.2 billion).

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 38 million customers worldwide and £1.532 trillion assets under administration (as at 31.12.22).

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 Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales no. 973271. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Platform Limited, trading as Canada Life, is a subsidiary of The Canada Life Group (UK) Limited, and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales no. 8395855. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA.