Financial experts are urging UK households to check the tax code on their payslips, as HM Revenue & Customs (HMRC) may owe them an average of £855 each. More than 730,000 households failed to claim PAYE refunds on their earnings last year, according to The Investors Centre.
The unclaimed refunds total around £624 million, based on HMRC data cited by ICAEW. The timing is significant as the 2025/26 tax year has ended, the 2026/27 tax year is underway, and many workers and pensioners are reviewing payslips, tax codes, and HMRC letters to verify their tax payments.
Why PAYE refunds go unclaimed
PAYE automatically deducts income tax from wages and pensions, but it is not always accurate. Overpayments can occur after changing jobs, being placed on an emergency tax code, retiring, starting pension withdrawals, working part of a tax year, or having multiple income sources.
Thomas Drury, money-saving expert at The Investors Centre, warns against assuming refunds arrive automatically. He 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.”
How to claim a refund
HMRC may send a P800 tax calculation letter if someone has overpaid or underpaid tax. According to GOV.UK, the letter explains how to claim a refund if one is due. Claims can be made online through the bank transfer service, personal tax account, HMRC app, or by contacting HMRC.
Drury emphasised the importance of acting on the letter: “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.”
Time limit for claims
Taxpayers have only four years from the end of the tax year in which PAYE was paid to claim a refund, according to ICAEW. Drury stressed: “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.”
