Brits 'overpaying £689 in tax' in HMRC error - are you owed money?
Almost a third of UK adults (31%) were on the wrong tax code when they checked, new research from Canada Life has suggested.
Three quarters (75%) of those who found they were on the wrong tax code overpaid HMRC £689 on average - equalling an estimated £5.8bn across the UK.
The most common tax code is 1257L - used when you have one source of income, either a job or pension. It means you can earn up to £12,570 (your personal allowance) before you start paying income tax. They start with 'S' in Scotland and 'C' in Wales.
Sometimes codes are different and this may be because you have more than one income stream or you have work benefits such as a company car or healthcare. If you've previously underpaid income tax, HMRC may also apply a different code to claim back the money.
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(s) recently, now is a good time.
“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.”
Canada Life's survey found less than half of the 2,000 people questioned (42%) know their current tax code is correct.
Read more: What the new tax year means for you and your finances – all changes for 2024 - 2025
Almost four in 10 (39%) don't know what their tax code means, and 69% don't know how to claim a tax rebate.
How to check your tax code
You can check your tax code and other details HMRC has for you online here.
If you think your tax code is wrong you need to contact HMRC. It may be that your employment or income details are wrong and you can change these on the HMRC website here.
HMRC is sometimes already aware you're on the wrong tax code and will send you a P800 or Simple Assessment letter by the end of the tax year (April 5) telling you how to pay or reclaim tax.
Sometimes HMRC will organise for over or underpaid tax to be automatically deducted or added from your payslip over the next tax year.
For more information, click here.
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