Millions of people could be due a refund from HMRC after new data revealed that incorrect tax codes have led to billions of pounds in overpaid tax. Analysis of HMRC figures shows that nearly six million taxpayers were charged too much Income Tax in the 2023/24 tax year. In total, it is estimated that £3.5 billion in tax rebates could be owed to taxpayers. In this article, we reveal why so many tax codes are wrong and how to check if you are owed a refund.
Why are so many people overpaying tax?
The vast majority of these overpayments are caused by incorrect tax codes. Your tax code is a string of numbers and letters (such as 1257L) that tells your employer or pension provider how much tax to deduct from your income.
However, the system relies on HMRC having up-to-date information about your circumstances. If their data is old or incomplete, it could lead to errors. Common reasons for a wrong tax code include:
- Old job benefits - HMRC might assume you still receive "benefits in kind" like a company car or private healthcare from a previous job.
- Job changes - If you change jobs, your new employer might not have your P45 details in time, which could put you on an emergency tax code.
- Multiple incomes - If you have more than one job or pension, HMRC might not apply your tax-free Personal Allowance to the correct income source.
These errors often go unnoticed for years because HMRC no longer routinely sends out paper tax code notices.
Tax code errors are common
It is easy to assume that HMRC always gets it right, but the numbers suggest errors are more common than you might think.
I know firsthand how easy it is to miss these details. Back in 2024, I noticed my tax code looked different to what I expected. After a quick query with HMRC, it turned out they had adjusted my code, assuming I still had private healthcare - a benefit from a previous employer, which I hadn't received for years.
The code had been wrong for over four years, meaning I had been overpaying tax every single month, amounting to just over £800. Fortunately, once I had spotted it, the fix was relatively simple. It was sorted with a single phone call to HMRC, and I received the full refund by cheque just a few weeks later.
How to check if your tax code is correct
You should check your tax code at least once a year. You can check the code on your payslip or you can check your P60, a document you receive from your employer - usually each April - which summarises your total earnings, tax, and National Insurance (NI) contributions for a tax year. You should also pay close attention to your tax code whenever your circumstances change, such as starting a new job or retiring.
To check your tax code:
- Check your payslip - Your tax code is usually printed on your payslip. The most common code for the current tax year (2025/26) is 1257L. This means you are entitled to the standard tax-free Personal Allowance of £12,570.
- Use the HMRC App - A quick way to check your code and see how your tax is calculated is by downloading the free HMRC app.
- Sign in online - You can view your tax code and tax history via your Personal Tax Account on the GOV.UK website.
We explain tax codes and how they work in more detail in our video below:
What to do if you have overpaid tax
If you suspect your tax code is wrong, you need to contact HMRC to correct it. They usually do not fix it automatically. You can update your details via the HMRC app or your online Personal Tax Account. Alternatively, you can call HMRC directly on 0300 200 3300. Lines are open 8am to 8pm Monday to Friday and 8am to 4pm on Saturday.
If you have overpaid, you will be due a tax rebate. If the overpayment is from a previous tax year, HMRC will calculate the total and either send you a cheque or allow you to claim it back online. If the error is in the current tax year, they may adjust your tax code so that you pay less tax in the remaining months of the tax year to redress the balance.
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