Millions of British workers are in line for a significant financial windfall after official data revealed a massive overpayment of income tax to HM Revenue and Customs (HMRC).
Billions Overpaid Due to Incorrect Tax Codes
Startling new figures, obtained through a Freedom of Information request by accountancy firm UHY Hacker Young, show that more than 5.6 million people overpaid a total of £3.5 billion in income tax during the 2023/24 financial year. This widespread issue means a substantial portion of the workforce has been paying more than their fair share.
The primary culprit behind these overpayments is often an incorrect tax code. For the majority of employees with a single job, the standard tax code is 1257L, which grants the tax-free personal allowance of £12,570 for the current year. However, errors in this code, or failure to update it when circumstances change, can lead to systematic over-deductions.
Neela Chauhan, a partner at UHY Hacker Young, issued a stark warning: "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."
How to Check and Claim Your Refund
Experts are urging individuals to take immediate action to review their financial position. Chauhan emphasised that people must check their tax codes and year-end PAYE summaries for mistakes, particularly those with any form of non-PAYE income or company benefits, such as a company car or private health insurance.
If you discover your tax code is wrong and you have overpaid, you have several routes to claim a refund:
- Call HMRC directly on 0300 200 3300.
- Use the official HMRC mobile app.
- Contact HMRC online via your personal tax account.
An HMRC spokesperson reiterated the individual's responsibility, stating: “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.”
Economic Backdrop: Unemployment Hits Five-Year High
This tax refund news comes against a challenging economic landscape. Separate data from the Office for National Statistics (ONS) shows the UK unemployment rate remained at 5.1% in the latest three-month period, its highest level in nearly five years.
The number of employees on payrolls fell by 43,000 in December alone, with the retail and hospitality sectors bearing the brunt of job losses. ONS director of economic statistics Liz McKeown noted, "The number of employees on payroll has fallen again, with reductions over the last year concentrated in retail and hospitality, and reflecting ongoing weak hiring activity."
Meanwhile, wage growth is slowing. Average regular earnings growth fell to 4.5% in the three months to November, down from 4.6% previously, marking the lowest rate since April 2022. McKeown added that private sector wage growth had slowed to a five-year low.
For the millions potentially owed money, claiming a tax refund could provide a vital and timely financial boost amidst these broader economic pressures.
