Millions of people may be due tax refunds as a result of tax code errors and confusion over pensions tax relief. However, individuals will need to apply for refunds, as HMRC won’t necessarily automatically correct these errors.

Multiple income streams

Wrong tax codes can be issued when HMRC does not have up-to-date information on company benefits or employee earnings. This can occur when people previously held more than one job, or had external sources of income, such as rental income, dividends or freelance work. It is estimated HMRC overcharged employees £3.5bn last year through such coding problems.

Higher-rate taxpayers can claim further relief

Many higher earners are also paying too much tax on their income, as they are not claiming back additional tax relief.

Basic-rate tax relief, at 20%, is automatically added to pension contributions at source. But higher-rate taxpayers, contributing to SIPPs or private pensions, can claim an additional 20% tax relief (or 25% for additional-rate taxpayers).

Some workplace schemes automatically give higher earners full tax relief, but not all. Those missing out are able to reclaim this money through self-assessment. HMRC also offers an online tax relief refund service for those that don’t normally file a tax return.