Millions of workers and pensioners could be paying more tax than they owe, according to a new warning from HMRC. A Freedom of Information (FOI) request submitted by accountancy firm UHY Hacker Young found that 5.6 million people overpaid a combined £3.5 billion in income tax in the most recent tax year, with the average overpayment standing at around £689.
HMRC paid around £3 billion back to 4.2 million people who had overpaid in the 2024/25 tax year alone, according to MoneySavingExpert's own FOI data. However, crucially, HMRC is under no legal obligation to notify individuals of overpayments or issue refunds automatically. This means it is your responsibility—not your employer's, and not HMRC's—to check your payslip and ensure your tax code is correct.
What is a tax code and why does it matter?
A tax code is the series of numbers and letters on a payslip that tells an employer or pension provider how much income tax to deduct. The most common code for the 2026/27 tax year is 1257L, which reflects the standard £12,570 personal allowance. If your code looks different and you are unsure why, it is worth checking.
Errors are most likely to creep in after a life change. The most common triggers include starting a new job without a P45, having workplace benefits such as a company car end, receiving multiple sources of income, or starting to draw a pension. In any of these situations, HMRC may be working from out-of-date information.
How to check and claim a refund
HMRC allows claims to be backdated for up to four years, meaning anyone who suspects they have been on the wrong code can potentially recover a significant sum. The quickest way to check and claim is through the HMRC app or personal tax account at gov.uk.
Stefani Williams, Partner at financial advisers Holden & Partners, said: "Tax codes can change after events such as a job move, starting to draw a pension, or receiving workplace benefits. It's something that's easy to overlook."
Williams added: "The common theme is that these things don't usually correct themselves automatically. Taking a little time to review your position can make a difference."
The warning comes as millions of workers face the risk of overpaying tax due to incorrect codes. With the average overpayment at £689, checking your payslip and tax code could save you a significant amount of money.
