My tax code changed THREE times and HMRC says I owe £3k – if I pay can I get a refund if it’s wrong?

I was promoted and received a decent pay rise in the last tax year and also did some extra work for another company, so my tax code changed three times and at one point I had two separate tax codes.

I have completed my tax return but not filed it as it says I owe £3,000, which came as a huge surprise.

I’m not convinced the calculations are correct and I’m not convinced my tax code was right. I am considering getting an accountant to check this but am unlikely to be able to do that before 31 January.

If I file my tax return and pay the bill and it later turns out that the calculations or my tax code weren’t correct, can I get money back from HMRC? Or is it a case of once it’s done, it’s done?

Angharad Carrick of This Is Money says: Tax codes are complicated at the best of times, so I understand why you are worried about having three changes within a year with the tax return deadline looming. 

Thankfully, tax code changes aren’t rare and you won’t be alone in facing this issue.

Plenty of people will be facing an unexpected tax bill ahead of the self-assessment tax deadline on 31 January because of changes to their tax code.

HMRC may update your tax code if you start a new job, you get a promotion, have additional income or there are changes to your taxable state benefits.

In your case, your tax code has changed three times which will have prompted HMRC to recalculate the amount of tax you owe for 2023/24.

However, you say you have made calculations and HMRC’s estimated bill is incorrect. 

We asked two tax experts about what you should do and whether you could receive a refund if HMRC is wrong.

Working out whether your tax code is correct

Ian Futcher, chartered financial planning consultant at Quilter says: Firstly, let me reassure you by saying that this is common.

Typically, everyone will have a tax code with letters and numbers. The letters and numbers reflect your personal circumstances. The letters refer to your personal allowances.

For example, a tax code with the letter L means you are entitled to the standard tax-free allowance. The number represents the amount of tax-free allowance you have. So, most people with one job will have the tax code 1257L. 

This means anyone with this tax code will have a tax-free allowance of £12,570, and the rest will be taxed depending on whether you are a basic rate taxpayer or a higher rate taxpayer. 

However, you could have many different combinations depending on your individual situation. If you are unsure, HMRC has a handy code checker that allows you to look at what your code means and what tax you should pay.

It gets more complicated if you have a second job. What will normally happen in this situation is you will get a new tax code, typically with the letters BR. This means that your tax-free allowance is used elsewhere, and that income will be taxed at the basic rate.

If you are a higher rate taxpayer, then you will have a different code. As I don’t know your personal circumstances, I’m making some assumptions here, but potentially, if you got a pay rise in the middle of the tax year, that may have pushed you into the higher bracket for the year, and some of your income before your pay rise was taxed too low. This may explain the unexpected charge.

Robert Salter, director at accountancy firm Blick Rothenberg says: Moreover, PAYE tax codes are also quite problematic if one has any benefits-in-kind (e.g. private medical insurance or a company car), or if one’s extra income has, for example, pushed one over one of the ‘cliff edges’ in the UK tax system whereby people suffer marginal tax rates which are much higher than the official higher tax rates of 40 per cent or 45 per cent. Typical cliff edges include, for example:

• When someone with children is in receipt of child benefit (or their spouse / partner is in receipt of this) and they earn between £60,000 – £80,000 (or more per annum).

• Alternatively, people earning between £100,000 and £125,140 per annum, will lose the personal tax allowance of £12,570 on a pro-rata basis, with the allowance dropping by £1 for every £2 of income within this band. This means that such taxpayers face an effective income tax rate on their income of 60% rather than the official 40 per cent tax band which the Government likes to quote.

As such, it is quite common for taxes for all/any of the above reasons only to be fully /correctly ‘captured’ at the self-assessment tax return stage.

Whilst it is impossible to know whether any of the above factors apply in your case, these scenarios show how it is quite possible for someone to have a tax underpayment of £3,000. 

How to work out whether your tax bill is correct

Angharad Carrick says: You haven’t provided any detail of how much you earn or what your tax code changed to, so it will therefore be difficult to know whether your calculations are correct.

You can check your liability by getting in touch with an accountant or tax adviser, who will also be able to suggest any claims for additional tax relief. However, it may be a little late to do this with the deadline just a week away.

So it may be best to submit your tax return now and make the payment before the deadline and then submitting an amended tax return after the deadline.

Futcher says: To make sure you meet the deadline of the 31 January, it’s probably best to file your return now to avoid the £100 fine for late filing that HMRC issues. 

This does not make it final; HMRC allows you to submit revised accounts up to 12 months from the date of submission of your initial tax return. This gives you time to double-check your figures with an accountant, and if you have overpaid any tax, it will be refunded.

Salter adds: In very broad terms, one would usually have until 31 January 2026 to file an amended tax return.

Will you receive a refund from HMRC?

Moreover, if the amended tax return were to reduce your tax liability, the Revenue would refund the taxes which have been overpaid. 

This can either be a direct refund to the taxpayer (though this can sometimes take some time for the Revenue to process), or via an adjustment to one’s future PAYE tax code, so that one – in effect – pays a lower PAYE tax bill in a subsequent tax year.

In addition, when looking at the tax refunds point, clients can actually just ‘keep the overpaid tax’ in the bank account of HMRC… By this I mean, the overpaid money could just be offset against any future tax liability that the reader expects to have.

HMRC’s response 

HMRC said if you’ve overpaid tax and you’re due a refund after submitting your tax return, it’ll let you know on your account. 

You can also request a refund directly online by going to the request repayment section and following the instructions.