5 Reasons You Might Be Overpaying Tax Right Now

According to HMRC's own internal estimates, millions of UK workers are overpaying Income Tax at any given time. The UK PAYE system is largely automated, but it is not infallible — and the burden is on the individual employee to spot errors and initiate a correction. Here are the five most common reasons UK workers pay more tax than they should, and exactly what to do about each one.

1. Wrong or Emergency Tax Code

This is the single biggest reason for tax overpayment. If your payslip shows a code containing "W1", "M1", or the letters "BR" or "0T" on your main job, you are almost certainly paying too much tax. Emergency codes are applied when HMRC does not have your complete income history — typically at the start of a new job without a P45, or after a career break.

Fix it: Log into your Personal Tax Account at GOV.UK and verify your current tax code and employments. If you spot an emergency code on your primary job, update your estimated income and HMRC will automatically issue a corrected code to your employer within days.

2. Overpaying on a Second Job

When you have a second job, your employer assigns it a BR code (20% on everything, no personal allowance). This is correct if your first job uses all your personal allowance. However, if your primary income is less than £12,570 a year, you have unused personal allowance that could be split between both jobs, significantly reducing your tax bill.

Fix it: Complete a P87 form or update your Personal Tax Account to ask HMRC to split your personal allowance between your two employers. This is particularly valuable for part-time workers with two low-paying jobs.

3. Not Claiming the Marriage Allowance

If you are married or in a civil partnership and one partner earns under £12,570 while the other earns between £12,570 and £50,270, the lower-earning partner can transfer £1,260 of their personal allowance to the higher earner. This reduces the higher earner's tax bill by up to £252 a year. The claim is backdatable by up to four years.

Fix it: Apply online at GOV.UK/apply-marriage-allowance. It takes about 10 minutes. Any historic overpayment will be refunded either through a cheque or an adjusted tax code.

4. Missing Work Expense Claims

Millions of UK workers are eligible for flat-rate tax relief on employment expenses but never claim it. This includes uniform washing allowances (nurses, police, etc. — up to £125/year), professional subscriptions (e.g., RCN, BMA, trade unions), and the HMRC flat-rate working-from-home allowance (£6/week). While the WFH allowance was scaled back in 2023 for employees, many are still claiming for prior years.

Fix it: Log into your Personal Tax Account or submit a P87 form (for expenses under £2,500). Claims can go back four tax years.

5. Unused Personal Savings Allowance

Basic rate taxpayers receive £1,000 of interest income completely free of tax. Higher rate taxpayers receive £500. Additional rate taxpayers receive nothing. If you hold savings in a standard bank account that charges tax at source, and your interest is below your allowance, you may be entitled to a refund of the tax deducted. Banks stopped automatically deducting savings interest tax in 2016, but legacy accounts or non-UK savings arrangements sometimes still do.

Fix it: Check your bank statements for any interest paid and verify whether tax was deducted. If it was, and your total interest income is below your allowance, reclaim it via your Self Assessment return or form R40.