5.6 Million UK Workers Overpay £3.5 Billion in Tax

Nearly 5.6 million workers in the United Kingdom overpaid income tax by a total of £3.5 billion in the 2023-24 financial year, primarily due to errors in their assigned tax codes, according to figures obtained by accountancy firm UHY Hacker Young through a Freedom of Information request to HM Revenue and Customs (HMRC).

The overpayments, averaging around £620 per person, affected employees taxed through the Pay As You Earn (PAYE) system, which deducts tax directly from wages. Self-employed individuals and those with additional taxable income, such as rental earnings, typically handle taxes via Self Assessment and are not included in these figures. HMRC issues tax codes—sequences of numbers and letters, such as the standard 1257L for most single-job earners entitled to the £12,570 tax-free personal allowance—to employers and pension providers to guide deductions. An incorrect code can lead to excessive withholding, leaving workers unaware they are due refunds.

UHY Hacker Young identified several common causes for these errors, including outdated information about changes in employment, such as new jobs or salary adjustments. HMRC may also make assumptions about ongoing benefits...