Millions of people across the UK are being urged to scrutinise their tax codes after shocking new figures revealed a multi-billion pound overpayment to the tax office.
£3.47 Billion Overpaid in a Single Tax Year
According to data obtained by the national accountancy group UHY Hacker Young via a Freedom of Information request, a staggering 5.6 million taxpayers paid too much income tax during the 2023-24 financial year. The total sum overpaid reached an astonishing £3.47 billion.
This works out to an average overpayment of approximately £620 per person, though the exact amount varies from individual to individual. The findings have prompted fresh calls for everyone to understand the codes on their pay slips and tax returns.
Why Are Tax Codes So Often Wrong?
Tax codes, used by employers to calculate deductions via the Pay As You Earn (PAYE) system, can become incorrect for several common reasons. These errors mean HMRC is effectively "guessing" what many people earn, according to experts.
The primary causes for an incorrect tax code include:
- Changes in employment circumstances that HMRC has not accounted for due to outdated information.
- Switching jobs or experiencing a significant change in income that hasn't been declared.
- HMRC incorrectly assuming an employee still receives company benefits, like a private health scheme or a company car.
- The tax office mistakenly factoring in additional income from freelance work or property rentals that the individual no longer has.
‘You May Never Get Your Money Back’
Neela Chauhan, a partner at UHY Hacker Young, issued a stark warning. “Millions of people are paying the wrong amount of tax simply because HMRC is almost guessing what they earn,” she said.
Chauhan emphasised that for a vast number of taxpayers, these errors go completely unnoticed. “HMRC won’t always correct overcharging mistakes automatically. If you don’t check your tax code or your PAYE calculation, you may never get your money back,” she cautioned.
The message from financial professionals is clear: taking a few minutes to verify your tax code against your current circumstances could be one of the most profitable actions you take this year. With billions sitting in overpayments, ensuring you are not part of this statistic is crucial for personal finances.
