5 Critical Checks: Why HMRC Is Warning Christmas Workers To 'Check Your Pay' Amid £5.8 Million Wage Arrears
The festive season is a crucial time for temporary and seasonal workers, but it also brings a significant risk of being underpaid, either through wage shortfalls or incorrect taxation. As of December 2025, HM Revenue and Customs (HMRC) has issued a clear and urgent warning to all individuals taking on Christmas jobs to "Check Your Pay," highlighting a pervasive issue that sees thousands of workers short-changed every year. This is not a historical problem; the latest figures for the 2024-2025 tax year reveal a stark reality: HMRC identified a staggering £5.8 million in wage arrears owed to 25,200 underpaid UK workers, with the tax authority issuing approximately 750 penalties to non-compliant employers.
This widespread issue encompasses two main areas of financial risk for temporary staff: direct wage underpayment (often linked to minimum wage compliance) and payroll errors, such as being placed on an incorrect tax code (like an emergency tax code), which can lead to significant overtaxing. For anyone starting a short-term contract, a seasonal market stall, or a temporary retail role this year, understanding the root causes of these errors and knowing exactly what to look for is essential to protect your earnings.
The Two-Fold Threat: Wage Arrears vs. Tax Code Errors
The term "underpaid" when discussing HMRC and seasonal workers often refers to two distinct, yet equally damaging, financial situations. It is critical to differentiate between an employer failing to pay the correct wage and the tax system deducting too much or too little tax.
The latest enforcement data from HMRC focuses heavily on wage arrears and compliance with the National Minimum Wage (NMW) and National Living Wage (NLW).
- Wage Underpayment: This occurs when an employer fails to pay staff for all hours worked, makes inappropriate deductions from pay, or does not meet the legal NMW/NLW requirements for the worker's age. The £5.8 million identified in the 2024-2025 tax year falls into this category, representing money employers illegally withheld from workers.
- Tax Code Errors (Overtaxing/Under-deduction): This typically affects short-term or seasonal staff who are new to the PAYE (Pay As You Earn) system, or those working a second job. When an employer doesn't have a correct P45 from a previous job, they often use an emergency tax code (like 0T, S0T, or L), which can result in a new hire being significantly overtaxed. One reported case in 2024 involved a retailer overtaxing a new hire by £800 due to such an error. While overtaxing is often corrected later, it severely impacts immediate take-home pay during a financially demanding time of year.
HMRC's message to seasonal and temporary workers is clear: payroll compliance is not optional, even for short-term contracts. Students and people on short-term contracts are particularly vulnerable to being short-changed.
5 Critical Checks Every Seasonal Worker Must Make Now
To avoid becoming one of the thousands of underpaid workers, seasonal staff must be proactive. These five checks cover both wage and tax compliance, providing a robust defense against financial loss.
1. Verify Your Tax Code Immediately
Your tax code determines how much tax is deducted from your wages. For most people with one job, the standard code is 1257L (for the 2024/25 tax year), meaning you can earn £12,570 tax-free. If you are a seasonal worker, especially if you have another job or recently started, check your payslip for the following codes:
- Emergency Codes (0T, S0T, L): These are often used by employers when they don't have your P45. They will tax you as if you have no tax-free allowance, leading to significant overtaxing.
- BR (Basic Rate): This taxes all of your income at the basic rate (20%), which is incorrect if you have a personal allowance.
- D0 or D1: These codes indicate you are paying the higher or additional rate of tax on all your income.
If you see an incorrect code, contact HMRC immediately using your Personal Tax Account to update your details and receive the correct code, which you then give to your employer. This is the fastest way to stop overtaxing.
2. Confirm Minimum Wage Compliance
The law requires you to be paid at least the National Minimum Wage (NMW) or National Living Wage (NLW) for your age. Do not assume your employer is compliant. Check the current rates and then calculate your hourly pay based on your contract. The common causes of NMW/NLW breaches include:
- Unpaid working time (e.g., time spent on security checks, training, or mandatory meetings).
- Inappropriate deductions (e.g., for uniforms, till shortages, or accommodation).
Keep a detailed log of your actual working hours, including start and finish times, to compare against your payslip. This documentation is vital if you need to raise a complaint about wage arrears.
3. Scrutinise Every Payslip Detail
Your payslip is your financial proof. Do not just look at the final figure. Check:
- Gross Pay: Does the total number of hours multiplied by your hourly rate match the gross pay amount?
- Deductions: Are the National Insurance (NI) and Income Tax deductions correct based on your tax code and earnings?
- Pension Contributions: If you are automatically enrolled, ensure the deductions are correct and not excessive.
4. Understand Your Employment Status
Seasonal roles can be complicated. You might be a temporary employee, on a short-term contract, or even self-employed (e.g., running a market stall). HMRC has also urged individuals making money from Christmas crafts or selling festive items to check if they need to report their earnings via Self Assessment. Understanding your status dictates your tax and employment rights, including holiday pay and auto-enrolment pension regulations.
5. Know How to Claim a Tax Refund
If you were placed on an emergency tax code and overtaxed, the good news is you can reclaim the money. HMRC's systems are designed to automatically reconcile your tax at the end of the tax year (April 5th). However, if you leave a seasonal job and do not start a new one, you can claim the overpaid tax back sooner. You will need to fill out a P50 form if you are not working and do not plan to work again before the end of the tax year, or wait for HMRC to send you a P800 tax calculation. The process for claiming a refund for overtaxed pensions, for instance, saw HMRC repay nearly £50 million in late 2024, highlighting the volume of over-deductions that occur across all income types.
Protecting Yourself: The Importance of Payroll Compliance
The HMRC's aggressive stance—issuing hundreds of penalties to non-compliant employers—underscores the seriousness of payroll compliance. Businesses that rely on seasonal and short-term staff are being put on notice that cutting corners on pay and tax is unacceptable.
For the individual worker, the solution lies in diligence and education. Do not assume your employer's payroll system is infallible, especially during the chaotic Christmas period when staffing levels are high and administrative errors are more likely. By proactively checking your tax code, verifying your minimum wage entitlement, and scrutinising your payslips, you are taking the necessary steps to ensure you receive every penny you have earned this festive season.
The £5.8 million in wage arrears is a stark reminder that underpayment is a real and present danger. By following these checks, you can ensure your Christmas earnings are maximized and that you avoid the financial headache of chasing tax refunds or unpaid wages in the new year.
Relevant Entities and LSI Keywords: National Minimum Wage (NMW), National Living Wage (NLW), PAYE (Pay As You Earn), HMRC tax error, emergency tax code, short-term contract, seasonal staff, wage arrears, payroll compliance, P45 form, P800 tax calculation, overtaxing, underpayment, UK workers, tax-free allowance, Self Assessment.
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