Millions of UK workers have been warned they must take personal responsibility for checking their tax affairs, as HM Revenue and Customs (HMRC) is under no legal duty to alert them to overpayments. This stark warning follows revelations that HMRC overcharged workers a staggering £3.5 billion in income tax last year alone.
Millions Paying the Wrong Tax
According to national accountancy group UHY Hacker Young, an estimated 5.6 million people paid too much tax in the last financial year. The group stresses that HMRC is "under no obligation" to proactively review individual accounts or tax returns to identify and inform people of these errors.
Neela Chauhan, a Partner at UHY Hacker Young, explained the root of the problem: "Millions of people are paying the wrong amount of tax simply because HMRC is almost guessing what they earn. For too many people, this will go completely unnoticed."
The Onus is on the Taxpayer
The core issue is largely attributed to incorrect tax codes issued through the Pay As You Earn (PAYE) system. A tax code is a combination of numbers and letters that dictates how much tax an employer or pension provider deducts. The most common code for the current tax year is 1257L, which corresponds to the standard personal allowance of £12,570.
Chauhan emphasised the responsibility now lies squarely with individuals: "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. The onus is on taxpayers to spot HMRC’s errors."
She specifically urged vigilance for those with non-PAYE income or company benefits, as these complexities make errors more likely.
How to Check and Claim
Typically, if an over or underpayment is identified by the end of the tax year (5 April), HMRC will send a P800 tax calculation letter or a Simple Assessment letter. This document outlines how to claim a refund or pay any tax owed.
HMRC does update its records when notified of changes, such as benefits or tax-deductible expenses, issuing a P2 'Notice of Coding' to the taxpayer. Employers and pension providers also receive these updates electronically to adjust payroll deductions.
However, the critical takeaway from accountants is that waiting for HMRC is not a strategy. Taxpayers are strongly advised to actively check their tax codes and year-end PAYE summaries for any discrepancies to ensure they are not unfairly out of pocket.
