- Around 5.6 million people paid more income tax than required in 2023–24.
- Most overpayments are linked to incorrect or outdated tax codes under PAYE.
- Experts warn many refunds may never be claimed without active checks.
Millions of workers and pensioners across the United Kingdom paid more income tax than they owed during the 2023–24 tax year, with total overpayments reaching £3.47 billion, according to verified figures obtained through an official information request.
The data shows that around 5.6 million people were affected, many of them relying on the Pay As You Earn system, where tax is deducted automatically from wages or pensions. The overpayments are largely linked to errors in tax codes issued by HM Revenue and Customs, which employers and pension providers use to calculate deductions.
System gets it wrong
Tax specialists say most errors stem from HMRC holding incomplete or outdated information. This can include assumptions that someone is still receiving company benefits, has a second income, or remains in a previous job. When such details are not updated promptly, tax codes can become inaccurate, leading to higher deductions month after month.
Changes in employment, the end of workplace perks, or shifts in personal circumstances are not always reflected quickly in the system. Errors can also be compounded when employers submit payroll data late or incorrectly. While HMRC operates the system, responsibility for spotting mistakes ultimately sits with the taxpayer.
Neela Chauhan, partner at UHY Hacker Young, was quoted in a news report saying that HMRC is under no obligation to alert individuals when they have been overcharged. She reportedly said that millions of people are paying the wrong amount of tax simply because HMRC is estimating their income, and for many, the issue may go completely unnoticed.
Taxpayers who have paid too much or too little by the end of the tax year on April 5 are usually sent a tax calculation letter or a Simple Assessment explaining the next steps. However, experts say this does not happen in every case, particularly if discrepancies are not flagged within the system.
Complexity adds to the confusion
Campaigners argue that the growing complexity of the tax system is making it harder for people to understand whether their tax codes are correct. Codes, often a mix of numbers and letters, can be difficult to interpret without professional help.
Emma Rawson, director of public policy at the Association of Taxation Technicians, according to a news report says that more people are having deductions coded out than in the past. She reportedly pointed to upcoming changes from the 2025–26 tax year, including how winter fuel payments for higher earners and high-income child benefit charges will be collected, either through payroll or self-assessment.
Experts say additional income streams such as freelance work, dividends, or temporary side jobs can further complicate matters, especially if HMRC assumes they are ongoing when they have stopped. Without intervention from the individual or their employer, these errors may persist for years.
Despite investment in digital services, specialists warn that many taxpayers may never reclaim overpaid amounts if they do not regularly check their payslips and tax codes. As the tax system evolves and becomes more detailed, keeping a close eye on personal tax records is increasingly being seen as essential rather than optional.
