Britons on wrong tax code have overpaid £5.8billion to HMRC - are you owed £689?
Britons on the wrong tax code have overpaid £689 to HMRC, on average, research shows
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Britons have overpaid billions of pounds due to being on the wrong tax code, sparking calls to check payslips.
Almost a third of UK adults who have checked their tax code (31 per cent) have found they have been on the wrong tax code at some point, new research from Canada Life shows.
Three quarters (75 per cent) of those who found they were on the wrong tax code have been overpaying HMRC by an average of £689, or £5.8billion as a nation.
One in six (15 per cent) UK adults don't know if they are on the right tax code, while one in five (18 per cent) have never checked their tax code.
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.
Tax codes are made up of a series of numbers and letters
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"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."
Tax codes are made up of a series of numbers and letters.
The most common tax code is currently 1257L, and this is commonly used if a person has one source of income - either through a job or pension.
People with this tax code can earn £12,570 a year, which is currently the standard personal allowance, before paying income tax.
Chew said: “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."
More than two-thirds (69 per cent) of those asked said they did not know the rules around claiming back overpaid tax.
Chew urged people to contact HMRC directly if they think their tax code is wrong.
"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," he said.
"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.
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“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 5), 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.”