5 Reasons You Might Be Overpaying Tax Right Now

HMRC estimates that at any given time, over a million UK workers are paying more income tax than they legally owe. The average overpayment is £855. Here are the five most common causes — and what to do about each.

Reason 1: Emergency Tax Code

When you start a new job without a P45 from your previous employer, HMRC often puts you on an emergency code (BR or 0T W1). This taxes all your income at 20% from pound one, with no personal allowance. Many workers stay on this code for months without realising.

Fix: Contact HMRC on 0300 200 3300 or update your details in your Personal Tax Account. Provide your previous employer's details and P45 reference if you have it.

Reason 2: Old Benefits Still on Your Code

If you had a company car, private health insurance, or other benefit-in-kind that has since ended, HMRC may still be taxing you as if you have it. This reduces your tax-free allowance unnecessarily.

Fix: Check your coding notice in your Personal Tax Account. If an outdated benefit is listed, report the change to HMRC online.

Reason 3: HMRC's Savings Interest Estimate Is Too High

HMRC adjusts your PAYE code to collect estimated savings interest tax in advance. If you've moved savings into an ISA, spent savings, or interest rates have fallen, the estimate can be far too high.

Fix: Log into your Personal Tax Account, check the savings interest estimate, and update it with the correct current-year figure.

Reason 4: Unclaimed Reliefs and Allowances

Many workers are entitled to tax relief they've never claimed: uniform allowance, professional subscriptions (BMA, NMC, etc.), working from home allowance (before its abolition in April 2026), mileage relief, and tools. All of these should reduce your tax bill but won't appear automatically.

Fix: Claim through your Personal Tax Account or through a Self Assessment return. Reliefs can be backdated 4 years.

Reason 5: Two Incomes Coded Incorrectly

If you have two jobs or a pension alongside employment, HMRC must split your personal allowance correctly between them. It often doesn't — leaving one source taxed at 20% from pound one unnecessarily.

Fix: Contact HMRC and ask them to split your allowance across your income sources in proportion to each income. This is a simple adjustment that HMRC makes routinely.

Frequently Asked Questions

How do I know exactly how much I'm owed?

Use our Overpaying Tax Calculator to check whether your current deductions match what they should be based on your gross salary and tax code.

Can I claim a refund without filing Self Assessment?

Yes. For PAYE workers, HMRC sends a P800 if it detects an overpayment. You can also claim through your Personal Tax Account or by writing to HMRC at Pay As You Earn, HM Revenue and Customs, BX9 1AS.