More than eight million Britons received tax refunds averaging £943 from HMRC after overpaying income tax, according to data obtained from a Freedom of Information request. The tax office refunded a total of £8.3 billion in overpaid tax during the 2022-23 tax year, the most recent figures available.
The main cause of overpayments is incorrect tax codes, which determine how much tax is deducted from pay under PAYE. The most common code, 1257L, allows earnings of £12,570 tax-free, but errors can arise when starting a new job, failing to provide full details to an employer, or working multiple jobs.
Research by Canada Life found that nearly a third of UK adults who checked their tax code had been on the wrong one at some point. Tax codes appear on payslips, P45 forms, P60 forms, and online at Gov.uk. Anyone suspecting an error should contact HMRC directly, as employers cannot correct codes.
At the end of each tax year, HMRC sends P800 letters informing individuals if they have overpaid or underpaid. Personal finance analyst Sarah Coles of Hargreaves Lansdown urged people to act promptly: “It’s a relatively straightforward process and this money is rightfully yours, so don’t hang about – make a claim as soon as you can.”
