Somewhere in HMRC's systems right now sits a list of 107,000 names, each one flagged against a tax calculation that might be wrong. Not necessarily wrong in HMRC's favour, either — the fault behind it has reportedly been overcharging PAYE and Self Assessment taxpayers since 2021, and HMRC itself has not said how many of the 107,000 cases under manual review will actually need correcting before a revised bill goes out. For anyone who has changed jobs, moved between employment types, or drawn income from more than one source in 2025/26, that uncertainty is worth taking seriously rather than filing away as someone else's problem.
What actually went wrong
The root cause is an IT flaw in HMRC's calculation systems that has existed since 2021, quietly producing incorrect figures for a subset of taxpayers each year without triggering any obvious error. Because the fault sits inside the calculation engine rather than in a single form or a single tax year, it has been able to persist through several PAYE and Self Assessment cycles before being picked up. The 107,000 figure relates specifically to 2025/26 calculations now under manual review, and HMRC has been contacting affected taxpayers directly where a discrepancy has been confirmed.
The amounts involved vary enormously and there is no single "typical" overcharge. Some cases reported in the press involve differences as small as £40, arising from a tax code mismatch or a timing difference between when income was reported and when it was taxed. Others are larger, particularly where several different sources of PAYE income or a change in employment status during the year has confused the calculation. HMRC's own tax practice contacts have said the difference is often modest for straightforward cases — a coding adjustment here, a timing quirk there — but that assessment applies to people with one job and one clean payroll record, not to anyone whose year looked messier than that. The size of the error tells you almost nothing about whether it's worth checking, because a £40 discrepancy is still £40 you didn't need to pay, and the process for challenging it is exactly the same as for a four-figure one. What changes with the size of the number is how much it's worth paying an accountant to sort out; below a certain point, most people are better off doing the reconciliation themselves and only calling in help if the figures genuinely won't tally.
Why this matters more as Making Tax Digital expands
There's a sharper edge to this than a one-off software bug. Making Tax Digital is steadily pulling more taxpayers into quarterly digital reporting — VAT-registered businesses already file this way, and MTD for Income Tax Self Assessment is now live for sole traders and landlords above the relevant income threshold. More frequent submissions should, in theory, catch errors earlier. In practice, though, a system-level calculation fault doesn't care how often you submit data; if the underlying engine is producing the wrong figure, more frequent digital touchpoints just mean the wrong figure gets confirmed more often before anyone notices.
Who's most exposed to an incorrect calculation
Anyone can be affected, but the risk is not evenly spread. HMRC's calculations rely on employers, pension providers and umbrella companies all reporting clean, consistent data — the more moving parts in your income for the year, the more places a mismatch can creep in. The people most likely to see a genuine discrepancy fall into a small number of overlapping categories, and it's worth checking whether you're in more than one of them.
- You held more than one PAYE employment during 2025/26, even briefly, and the two payroll records weren't reconciled against each other
- You moved between working through your own limited company (a personal service company, or PSC) and working through an umbrella company — each switch changes the payroll, tax code and pension setup HMRC has to combine
- Pension contributions, whether workplace auto-enrolment or a personal scheme, don't match what your provider actually reported
- Employment expenses or reliefs you're entitled to were never applied, so HMRC calculated on gross figures that don't reflect your real position
- PAYE income was duplicated or wrongly allocated between two employments — this one is surprisingly common when a P45 is issued late or not at all, to name just the most frequent culprit among several
Contractors moving between IR35 arrangements sit at the sharp end of this list, since a single tax year might involve an Outside IR35 assignment through their own company, an Inside IR35 role via an umbrella, and then a return to the PSC model — three separate payroll setups feeding into one HMRC calculation. But you don't need to be a contractor to be caught out. A teacher who did a term of supply work through an agency, a nurse who picked up bank shifts alongside a substantive NHS post, or anyone made redundant partway through the year and re-employed elsewhere can trip the same duplication or mismatch problem.
What to check in your own records
Waiting for a letter from HMRC is the passive option. The better one is to go and look yourself, and it takes less time than most people assume — twenty minutes with your Personal Tax Account open in one tab and your payslips in another usually tells you whether something's off.
If you're employed or work through an umbrella company
- Compare your P60 total pay and tax deducted against your last payslip of the tax year — they should match exactly, not roughly
- Check every PAYE coding notice you received during 2025/26 for unexplained changes, especially mid-year adjustments with no letter or context attached
- Confirm employer pension contributions on your payslips match the figures showing in your pension provider's annual statement
- If you had two jobs, check whether HMRC's Personal Tax Account shows both employments correctly, with no overlap in the income figures
If you operate through your own limited company
- Check that the salary reported through your payroll matches what HMRC's Personal Tax Account shows for that employment
- Confirm dividends were declared correctly and in full on your Self Assessment return — a missed or duplicated dividend voucher is a common source of error
- Reconcile pension contributions made by the company against what's recorded on your account
- Where you had any Inside IR35 income during the year, check there's no overlap between that deemed employment income and your PSC salary
Whichever category you fall into, the Personal Tax Account is the single most useful document you have. It's the same account HMRC urged people to check the last time it overcharged taxpayers, to the tune of £3.5 billion across the population — a figure that should tell you this isn't a rare glitch confined to a handful of unlucky cases.
If HMRC writes to you
Don't panic, and don't assume the letter is automatically correct just because it came from HMRC — reconcile the figures against your own records before you accept or challenge anything.
Read the letter properly rather than skimming for the headline number, since it will usually explain which tax year and which income source triggered the recalculation. Pull together your P60s, P45s, payroll records, pension statements and Self Assessment submissions for the relevant year and lay them alongside HMRC's figures line by line. Check that every source of income you actually had is reflected — a missing employment or an extra one that isn't yours is the fastest way to spot an error at a glance. Look specifically for periods where two employments overlap on paper even though one had actually ended, since that's the single most common cause of the duplication behind this particular batch of errors. Note down the exact figure HMRC has used for each income source and compare it, item by item, against what your own paperwork says rather than against a rough sense of "roughly right." If anything doesn't add up, or if you're not confident reading a PAYE calculation on your own, this is exactly the situation an accountant or tax adviser is worth paying for; the fee is usually a fraction of what a wrongly-accepted overcharge would cost you. Keep copies of everything you send back to HMRC and the date you sent it, because a manual review running into six figures of cases is not going to move quickly, and you'll want your own paper trail if a query drags into next year's Self Assessment cycle.
It's also worth remembering that HMRC's own review is unable to say in advance how many of the 107,000 flagged calculations will actually change once someone looks at them properly. Some will turn out to be correct after all. That's precisely why a letter from HMRC should prompt a check of your own records, not an automatic payment or an automatic assumption of innocence on either side.
Stop treating your tax position as a once-a-year job
The single most effective protection against this kind of error is dropping the "one-and-done" habit — the assumption that checking your tax once a year, usually when the Self Assessment deadline is bearing down, is enough. Errors caught within weeks are a quick email and a corrected coding notice. Errors caught two or three years later, once they've compounded across multiple tax returns, mean unpicking a much bigger mess with much less certainty about what actually happened.
A short, regular routine beats an annual scramble every time. Review your Personal Tax Account whenever your employment situation changes — a new job, a second income, a pension starting to pay out. Read PAYE coding notices the day they arrive rather than filing them unopened. Reconcile umbrella payroll deductions and pension contributions each time you receive a statement, not once a year in a panic. Keep an eye on your Self Assessment submissions for consistency year to year, and treat any HMRC correspondence as worth ten minutes of your attention rather than something to leave in a drawer.
None of this guarantees you'll never be caught by a system-level fault like this one — that's on HMRC's side of the ledger, not yours. What it does guarantee is that if you are caught, you'll spot it in weeks rather than years, with your own paperwork ready to prove your case the moment a letter lands on the doormat.