Introduction
Millions of workers and pensioners in the United Kingdom have overpaid a total of £3.47 billion in income tax during the 2023–24 tax year, according to verified figures gathered through an official information request. Accountancy experts have highlighted that mistakes within HM Revenue and Customs (HMRC) tax coding systems and growing tax complexity are contributing to widespread overcharging.
Experts and campaigners warn these errors often go unnoticed, leaving a significant proportion of taxpayers out of pocket. The situation has raised important questions about taxpayer awareness, official communication, and the urgent need for improved processes.
Scale of Overpayments
Official data indicate that approximately 5.6 million individuals across the UK paid more tax than required over the last financial year. This figure includes both employees and pensioners, many of whom rely on the Pay As You Earn (PAYE) system for their income tax deductions.
The £3.47 billion overpaid reflects inconsistencies resulting mainly from inaccuracies in individual tax codes. The figures, confirmed by authorities, demonstrate the financial scale of errors generated by flawed or outdated taxpayer information within the HMRC system. This trend has underlined concerns about the reliability of tax deductions for millions of households.
How Tax Code Errors Occur
Employed individuals and pensioners depend on the accuracy of tax codes provided by HMRC, which employers and pension providers use to determine how much income tax to withhold. Mistakes often arise when HMRC holds incomplete or incorrect records about a person’s income or benefits, for example, assuming an individual still receives company benefits or additional income streams that have already ended.
Such misinformation can result when changes to employment, cessation of company perks, or alterations in personal circumstances are not promptly updated within the system. Experts also note that errors may be compounded by inaccurate or delayed payroll submissions from employers.
Taxpayer Responsibility and Awareness
HMRC policy currently places responsibility on individuals to ensure their tax codes are accurate. However, experts warn that many taxpayers are unaware they have been overcharged, and refunds are not issued automatically unless a discrepancy is detected and reported.
'The onus is on the taxpayer to check that they are not being overcharged through PAYE, as HMRC has no obligation to tell them when this happens,' said Neela Chauhan, partner at UHY Hacker Young. Specialists have stated that millions of people are at risk of continued overpayments if they do not regularly review their payslips and tax codes. Users who fail to spot errors may be unable to reclaim overpaid tax, often remaining unaware they have been affected.
Impact of Payroll and Information Gaps
Tax code miscalculations are commonly linked to HMRC not having the most up-to-date details about changes in employment status, benefits, or additional income. The situation is worsened when employers provide payroll information late or submit incorrect data.
Secondary income streams, such as freelance work or dividend payments, can add to confusion, particularly if HMRC mistakenly assumes these continue when they have ceased. These information gaps are often not rectified without direct action from individuals or their employers.
Growing Complexity in Taxation
The UK income tax system has become more complicated in recent years, with new rules and payment structures being introduced. Emma Rawson, Director of Public Policy at the Association of Taxation
Technicians, commented, 'More and more people are having deductions coded out than they did in the past.' She also noted upcoming changes from the 2025–26 tax year, such as winter fuel payments for higher earners and high-income child benefit charges being collected via payroll or self-assessment.
These complexities leave many taxpayers struggling to interpret their tax codes, which often appear as unfamiliar combinations of numbers and letters. Experts say the process of confirming the accuracy of tax codes can be daunting for those without professional expertise.
Final Summary
Tax code errors during the 2023–24 tax year have resulted in millions of UK workers and pensioners overpaying a combined £3.47 billion in income tax. The causes are attributed to a mixture of administrative lapses, employer and payroll errors, and increasing tax code complexity.
Despite ongoing investment in digital services, the burden remains on individuals to monitor and rectify errors in their tax records. Experts warn that without proactive checks, significant numbers may not recover overpaid amounts.
As tax rules evolve and the system becomes more intricate, understanding and reviewing personal tax affairs grows ever more critical. For taxpayers wishing to track their financial obligations, convenient tools such as the Pie app offer a way to stay aware of changes and potential discrepancies.
