A new Freedom of Information requested from HMRC, released to the public has found that 5.6 million in the UK paid more tax than they needed to in 2023/24.

Whilst headlines often focus on the UK’s tax gap – the amount of tax owed vs the amount of tax actually collected by HMRC – this new data shows that taxpayers overpaid £3.47 billion in the same year.

How do most people end up overpaying tax?

One of the most common causes for the overpayment of tax, is the application of the wrong tax code, resulting in more people paying more via the Pay As You Earn (PAYE) system.

The PAYE tax code is issued by HMRC to let employers know how much Income Tax and National Insurance to deduct from employees’ wages or pension contributions before their take home salary is paid.

However, these should be checked regularly by employees on their payslips to ensure that they aren’t overpaying or underpaying tax.

The onus is on individuals to ensure that this is correct. Common changes, such as the removal of a benefits-in-kind, could trigger a change that results in more tax being paid.

Similarly, with the rise in side hustles, there is a growing number of people reporting income outside of PAYE, which can result in changes to their tax code that they may not notice.

Receiving a pay rise, changing your benefits or starting a new role are also common triggers for a new tax code.

Equally, employers have a responsibility to ensure that the payroll information that they submit to HMRC is correct, as errors can result in the incorrect amount of Tax and NICs being collected.

Experts believe that often small changes to tax codes go unnoticed by many taxpayers, resulting in them paying too much.

Speaking to Accountancy Daily, Emma Rawson, Director of Public Policy at the Association of Taxation Technicians, said: “The tax system overall has become more complicated and more and more people are having [deductions] coded out than they did in the past.”

She points to recent changes to the Winter Fuel Payment and High-Income Child Benefit Charge as examples of additional complication that could result in people missing changes to their tax code.

What should you do to ensure you don’t overpay tax?

As tax codes are so central to this issue, you should ensure that you regularly check your on your payslip and seek advice if you aren’t sure if something has changed and for what reasons.

HMRC provides tools on GOV.UK to help you check your tax code and, if you have overpaid, seek a refund.

However, if you do not have an in-depth understanding of how tax codes work, it is still easy to miss a potential overpayment.

Although HMRC offers its own helplines, the tax authority has already recognised that millions of calls each year go unanswered.

Its digital response services are improving, but they too can make it challenging to make contact with HMRC.

Our experienced tax advisers can review your tax code, explain any changes, and help you recover overpaid tax where possible.

We also support employers by reviewing payroll processes to ensure accurate reporting to HMRC to reduce the risk of future errors.

Get in touch today to arrange an initial discussion and find out whether you’re paying more tax than you need to.