More than 730,000 PAYE refunds worth a combined £624 million went unclaimed last year, according to data from HMRC analysed by the Institute of Chartered Accountants in England and Wales (ICAEW). The average unpaid repayment stands at £855, prompting a fresh warning for workers and pensioners to check their tax status.
The warning comes as the 2025/26 tax year has ended and the 2026/27 tax year is underway, meaning many people will soon receive payslips, tax codes, and HMRC letters that could reveal overpayments.
Why PAYE refunds go unclaimed
Thomas Drury, money-saving expert at The Investors Centre, said: “People hear the word PAYE and assume everything is handled for them. But PAYE is only as accurate as the information behind it. If your tax code was wrong, your job changed, your pension income changed, or HMRC did not have the full picture at the right time, you may have paid more tax than you needed to.”
He added: “The worrying part is that many people do not realise they have to take action. A refund can be due, but if you ignore the letter or do not check your account, that money can sit unclaimed.”
How to claim a refund
HMRC may send a P800 tax calculation letter if someone has paid too much or too little tax. According to GOV.UK, the letter tells people how to get a refund if one is due. If the letter says they can claim online, they can do so through the online bank transfer service, their personal tax account, the HMRC app, or by contacting HMRC directly.
Drury stressed: “A P800 is not something to throw in a drawer. It is a calculation of whether you paid the right amount of tax. If it says you are due a refund, you need to read exactly what it tells you to do. Some people assume HMRC will just send the money automatically, but that is not always the case. If the letter says you need to claim, you need to claim.”
There is also a time limit: taxpayers have four years from the end of the tax year in which PAYE was paid to claim a refund, according to ICAEW. Drury noted: “That deadline matters. This is not money you should leave until later. If you are owed a refund, it is your money, and there is no reason to let it sit there unclaimed.”
Who is most likely to be affected
The refund warning applies to ordinary workers whose circumstances changed during the tax year. Drury said: “If you changed jobs, had a gap between jobs, worked multiple jobs, received a bonus, started taking pension income, or were placed on an emergency tax code, you should be checking. Those are exactly the moments where PAYE can become messy.”
Pensioners should also be vigilant. “Pension income can be taxed through PAYE too. If someone has more than one pension, has started drawing income, or has changed how they receive pension payments, it is worth checking whether the tax taken was correct,” Drury added. The same applies to people who moved from work into retirement, reduced their hours, or stopped working part-way through the year.
“Tax is calculated across the year. If you only worked for part of it, you may have paid tax as though you were going to keep earning at the same pace all year. That can create overpayments.”
Checks Brits should do now
Drury recommends logging into your personal tax account or the HMRC app to check your tax code, income record, and whether HMRC says a refund is due. GOV.UK states that a personal tax account can be used to check an Income Tax estimate and tax code, claim a tax refund, and check how much Income Tax was paid in previous years.
“The important thing is to compare HMRC’s information with your own records. Look at your payslips, your P60, your P45 if you changed jobs, and any pension statements. If something does not match, do not ignore it,” Drury said.
He also urged people to examine tax codes on their payslips: “The standard tax code is not right for everyone. Your code can change if you have benefits from work, multiple jobs, pension income, previous underpayments or other adjustments. Do not just glance at it. Ask whether it actually reflects your situation.”
If someone receives a P800 and is due a refund, online claims are usually paid within five working days, while cheque claims can take six weeks, according to GOV.UK. “That is another reason to act quickly. If you can claim online through the official route, it is usually faster than waiting for paper processes,” Drury said.
Do not hand your refund to a claims firm
Drury also warned against using refund firms that offer to claim money on behalf of individuals. He said: “There are legitimate services out there, but many people do not need to pay someone to claim a straightforward PAYE refund. If HMRC has written to you, or your personal tax account shows a refund, start with the official GOV.UK route. Otherwise, you could end up giving away part of your own money unnecessarily.”
He added: “Tax refund messages are one of the areas scammers love because people get excited by the idea of money coming back. Do not click random links in texts or emails. Go directly through GOV.UK or the HMRC app.”
Drury concluded: “Most people are not tax experts, and they should not have to be. But everyone should know how to check whether they have paid the right amount. If you are owed money, claim it. If your tax code is wrong, fix it. And if you receive a letter from HMRC, open it and read it properly. The worst thing you can do is ignore it, because that could mean leaving hundreds of pounds with HMRC that should be back in your own account.”
