HMRC issues tax warning as more than 730,000 miss out on £855 refund - check if you're affected

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Some tax refunds will no longer be paid automatically following an HMRC process change

More than 730,000 people missed out on tax refunds last year, with the average unclaimed amount sitting at £855.

That money was owed to workers but never reached them, often because they did not take the steps needed to request it.

HMRC is currently working through roughly 45 million PAYE tax accounts to identify who has paid too much or too little.

P800 letters have already started landing on doormats and will keep going out until November 2026.

Those who have overpaid are being dealt with first, so workers owed money should expect to hear from the tax office before those who owe it.

But receiving a P800 does not guarantee the refund will arrive on its own. HMRC has updated its process, and for claims spanning multiple years, workers now need to actively request their repayment.

Around 700,000 umbrella workers across the UK have particular reason to pay close attention to this process.

Although they are taxed through PAYE just like any other employee, these workers tend to move between assignments more often and may change umbrella companies or employers regularly.

That pattern of frequent job changes makes it harder to keep track of tax codes and HMRC records.

The tax office itself acknowledges that people can end up paying the wrong amount of tax when they leave one role and start another, or when they are placed on an incorrect tax code.

For flexible workers juggling multiple assignments, the chances of an error creeping in are higher, making it all the more important to check any correspondence from HMRC carefully.

Seb Maley, CEO of Qdos, an insurance provider for flexible workers, urged people not to be complacent.

"HMRC is reviewing the taxes 45 million people and the UK's estimated 700,000 umbrella workers should pay particularly close attention," he said.

"Moving between assignments and PAYE employers means there can be more changes to keep track of. HMRC itself recognises that starting and finishing jobs can result in people paying the wrong amount of tax. So if you work flexibly, don't assume your tax position is automatically correct."

He added: "And crucially, being told you're owed money by HMRC doesn't always mean it will simply land in your account.

"Depending on the circumstances, you may still need to actively claim it. More than 730,000 refunds went unclaimed last year, averaging £855. If you receive a P800, check the figures carefully, follow HMRC's instructions and make sure you claim anything you're owed."

Workers should also be on guard against tax refund scams. HMRC has made clear that it will never contact people by text message or email asking them to claim a refund. Any such message should be treated as fraudulent.

On the other side of the equation, those who have underpaid tax face a simpler process.

Where someone owes money, HMRC will typically recover the amount automatically by adjusting their tax code through PAYE, meaning no separate action is usually required from the worker.

The key message for anyone receiving a P800 letter between now and November is straightforward: read it carefully, check the figures against your own records, and if you are owed money, make sure you follow the correct steps to claim it.