More than five million taxpayers overpay with wrong tax codes – how to check yours is right

Taxpayers are being urged to check their payslips and pension paperwork for errors that could be costing them money – with 5.6 million Brits paying too much income tax due mainly to tax code mistakes.

HMRC overcharged the more than five million people £3.5 billion in income tax in the 2023/24 tax year, analysis of the latest data available by accountancy group UHY Hacker Young found.

This overcharging through the PAYE system largely stems from HMRC issuing incorrect tax codes. A tax code is a series of numbers and letters used by HMRC to tell your employer or pension provider how much income tax to deduct from your pay or pension under the Pay As You Earn (PAYE) system.

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For example, the common code 1257L means you can earn £12,570 tax-free – the personal allowance – before tax is taken.

If a taxpayers’ circumstances change and HMRC does not have the most up-to-date information, it will continue to deduct tax based on its own estimate of income without checking that with the taxpayer.

Taxpayers should check they are not overpaying through the PAYE system as HMRC is under no obligation to check and tell them if they have overpaid, UHY Hacker Young warned.

Neela Chauhan, partner at UHY Hacker Young, said: “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.”

We look at which taxes are going up in 2026 in a separate article.

How HMRC could get your income tax code wrong

HMRC can issue an incorrect tax code due to a number of reasons. The most common errors, according to UHY Hacker Young, arise because of a lack of communication.

For example, HMRC could assume an employee is still receiving company benefits-in-kind such as company cars, healthcare and even gym memberships even though they may no longer be receiving that benefit.

Incorrect assumptions by HMRC about an employee’s additional income, such as rental income, dividends, or freelance work that they are no longer doing, is another reason a taxpayer may be given the wrong tax code.

Other reasons HMRC gets it wrong include confusion over how many jobs an individual is currently working and out-of-date or late employer payroll information.

HMRC’s coding assumptions often go unchecked because paper tax code notices are no longer routinely issued, UHY Hacker Young said.

This means millions of employees may be unaware that their tax code is wrong and they are being overcharged.

How to check your tax code

People need to be proactive in checking how much tax they are paying because HMRC now conducts fewer internal assessments to find errors and overpayments, accountants warned.

You can find your tax code on any payslip or your payment advice (P60) from your pension provider. You may have different tax codes for each job or pension.

If you have registered with HMRC for an online tax account or have downloaded the HMRC app, you will also be able to find your tax code there.

UHY Hacker Young’s Chauhan said: “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.

“Individuals must check their tax codes and year-end PAYE summaries for mistakes. Particularly those with any form of non-PAYE income or company benefits.”

If you discover HMRC has the wrong tax code for you, the remedy may not be a quick fix however, as even when overpayments are identified, reclaiming the money can be slow and frustrating, in UHY Hacker Young's experience, something HMRC disputed.

An HMRC spokesperson said: “Everyone is responsible for ensuring their own tax code is correct, and they can manage and update their details quickly and easily via the HMRC app or their online tax account. Customers should also discuss any tax code issues with their employer first.

“The vast majority of repayments are paid promptly, and we are investing £500 million in digital services to help customers pay the right tax first time so fewer refunds are necessary.”