Tax codes, and why everyone should check them

Some 5.6 million PAYE taxpayers overpaid HMRC last year.

Overall, this meant that HMRC was overpaid by £3.5 billion, according to the freedom of information request that prompted the disclosure.

How does it happen?

Overpayment often arises because the tax code is wrong. What’s more, once tax has been overpaid, it’s all too easy for it to stay in HMRC’s coffers. Data from HMRC shows that over 730,000 tax refunds went unclaimed last year, with the average refund worth £855.

The solution is to make checking your tax code routine. It’s not always appreciated that it is the taxpayer’s responsibility – not the employer’s, or HMRC’s – to make sure the code is right. Note that as part of the 2026/27 annual coding notice process, HMRC is removing employment expenses of over £120; and Gift Aid higher rate relief from tax codes where it believes these may no longer be appropriate. A claim to HMRC to correct the position may be submitted if a taxpayer considers that they are still entitled to such relief.

Due a refund?

HMRC no longer issues end of year tax refunds automatically for most PAYE taxpayers. A text or letter, explaining that a refund is due, should be received instead. It is then necessary actually to claim the refund, and HMRC advises that the quickest way to do this is via the HMRC app. In the PAYE section of the app, a green ‘Claim your refund’ button will show if HMRC thinks you are due a refund. It will also show the amount due. Tap this to claim the refund, which will be paid directly into your bank account.​

Please note: This blog/news post provides an overview or insight only and therefore, should be viewed as being for guidance only purposes. Legislation does change and your own circumstances may differ from the situation highlighted in this blog. Therefore, before taking any action we recommend you get in touch with us to discuss your own situation.