How to claim a tax refund

It’s inevitable that tax will be due to the taxman in one form or another, but it’s always welcomed news when you find out you could claim for a tax refund! Always be prudent when receiving any unexpected communications offering a tax rebate as these could be fraudulent tax scam attempts. However, where you have genuine reason to believe you are due a tax refund then you will want to find out whether you’ll have to make a claim and how, how you can expect to receive the tax rebate, and how far back you can go when making a claim for a tax refund.

How does overpaid tax arise?

There are numerous ways you could have been paying too much tax, but most often it will be due to an incorrect tax code being used for your PAYE income or a change in your income through the middle of a tax year, the wrong tax code being used for your pension income, or a mistake made on your self-assessment tax return.

You may have overpaid tax from your PAYE income and could claim a refund if:

• Your new employer did not have all the necessary information for adding you onto their payroll when you first started so an emergency tax code was used
• You employer made a mistake and used the wrong tax code
• You were only employed for part of a full tax year, or you went from full-time work to part-time work
• You had more than one job at the same time
• You have other income which HMRC tax you through your tax code, but this income has reduced

Where you receive a pension, you could have paid too much tax if:

• Your pension provider used the wrong tax code
• The amount of state pension you receive is not matched up to the correct tax code
• You have more than once source of PAYE income such as more than one pension
• You paid too much tax on a pension lump sum

If you complete your own self-assessment tax return, you could have made common mistakes resulting in overpaying tax such as:

• Not claiming for all eligible expenses
• Forgetting to include pension contributions made into a private scheme
• Including earnings for the wrong period such as if you include all of April
• Not declaring any gift aid donations you have made in the year
• Alternatively, you could overpay tax where you make payments on account, but your income (and therefore tax liability) has reduced from the previous year

How do I know if I have overpaid tax?

If the only income you receive is taxed at source, the one way you can check if you have overpaid tax is by paying attention to your tax code. This can be found on your payslip. It’s important to make sure you understand your payslip as it contains important information on what deductions have been taken out of your salary before it has been paid to you. It could therefore be legitimate deductions such as repaying a student loan rather than overpaying on tax!

Alternatively, if you receive pension income, then you can check which tax code has been used on your pension advice slip, or P60 which is issued once a year. Don’t forget that whilst you can only access your state pension at the state pension age (dependent on the year you were born), private pensions or workplace pensions often allow you to draw down funds from age 55 onwards. This means you could be receiving both a salary and pension income which could affect your tax code.

1257L is the normal tax code which will apply to most people for the tax year 2023/24 where they only have one job or pension, however there are many other tax codes which can be used. Other common tax codes include ones which specifically apply to people who are in the higher income tax bracket or additional rate tax bracket. This may apply to you if you have more than one job, have one job and receive pension income, or receive more than one pension.

Once you know which tax code is being used, you can check if this is correct by using HMRC’s online tool. You will need to sign in with your Government Gateway ID and password, but if you have never used an HMRC online service before, then you can create a new one easily. If you find that an incorrect tax code has been used, then you’ll be able to inform HMRC of your personal circumstances in order for them to change it. Those who are self-employed and are taxed through completing a self-assessment tax return should use the self-employed ready reckoner tool instead.

In some instances, you will not have to check if you have overpaid tax at all and will instead be informed by HMRC directly. They will usually do this by sending you a P800. The P800 contains details of how much they think you have overpaid by and also lets you know how they will refund you.

What is a P800?

A P800 is a tax calculation generated by HMRC which is sent to you when they believe that you have either overpaid or underpaid tax. The figures used for the calculation are collected from various sources which are then automatically reconciled. Certain organisations are obliged to regularly report on your finances to HMRC including your employer, pension provider, bank or building society. These places will provide details on how much money has been paid to you, or interest paid into your accounts, as well as any tax that has been deducted.

What to do if you receive a P800

P800s are usually produced after the end of a tax year (5^th April), but you may well find that you do not receive one until September or October time. Not everyone receives a P800, and they are only sent to people who HMRC estimate to have overpaid or underpaid tax. If you receive a P800 which says you are due a refund, you must check HMRC’s calculation carefully. This is because the calculation is only an estimate based on the information HMRC receive. It may therefore not include all information relevant to your tax position for any given tax year, such as if you made disposals. If you do not correct HMRC and receive the refund, you could not only have to pay back any amount received but could also face a penalty.

Where you are due a refund, the P800 will let you know if you can claim this through your Personal Tax Account online via an online bank transfer. If you cannot claim your refund online, HMRC will send you a cheque which can take up to 60 days to issue. If you can claim online but fail to do so, HMRC will still automatically issue you a refund, but it will be sent by cheque and therefore take much longer for you to receive.

How to claim a tax refund

Depending on how you have overpaid tax, there will be different recommended ways to claim it back. The easiest way to find out how to claim a tax refund is to use HMRC’s online tax refund service. This will take you through a series of simple questions and then advise you on what to do. You’ll be able to use this service where you have overpaid tax from:

• Salary received from a current or previous employment
• Pension payments
• Income from a life or pension annuity
• A redundancy payment
• A self-assessment tax return
• Interest from savings of PPI
• Any foreign income
• Any UK income received but you live abroad
• Fuel costs or work clothing for your job

In most cases, you’ll be able to make a claim online or HMRC will ask you to wait for a P800 before doing so. However, in some other situations, you may be advised to claim through a different route.

Claiming a tax refund on an emergency tax code or overpaid tax on employment income

If you were put on an emergency tax code when you started a new job because your employers did not have all the information they needed, or your employers have accidentally used the wrong tax code, then you will often find that you do not need to make a claim for a tax refund. Instead, you can ask HMRC to inform your employers of the correct tax code to use. Once your employers apply the right tax code, their PAYE (‘pay as you earn’) system will adjust how much tax to deduct from your salary. This will often mean that where you have overpaid tax, you’ll begin to receive your tax refund in the form of reduced tax deductions from your salary instead.

Claiming a tax refund when you will no longer be working

Whether you are going on a sabbatical, retiring from work, or any other reason where you will stop being employed and do not foresee receiving a taxable at source income (including receiving any benefit income) for a minimum of 4 weeks, then you can make a claim for a tax refund. To do this you can either claim online (again you will need a Government Gateway ID and password) or you can claim by completing form P50 and posting it to HMRC. You will not normally need to send in your P45, but where there are any discrepancies from your p50 and the information HMRC holds for you from your employers, they may ask you to send this in.

Claiming a tax refund when you are leaving the UK

For those who are leaving the UK permanently or long-term, you will no longer have to pay any tax on income that is taxed at source. Bear in mind however, that you may still have to pay tax on any UK income such as if you have rental property. This change in circumstance may well mean that you have overpaid tax on any taxed at source income if you move away part way through a tax year. To claim a tax refund, you can request it online or complete form P85 and send it to HMRC. You will also need to include parts 2 and 3 of your P45 from your last UK employer. Be sure to inform HMRC if you return to the UK.

Claiming a tax refund for any other reason urgently

Where you do not receive a P800 or need to claim a tax rebate urgently before receiving a P800, you should write to HMRC at:

Pay As You Earn and Self-Assessment
HM Revenue and Customs
BX9 1AS
United Kingdom

If you decide to use this route, make sure you include as much information as possible to ensure your refund is not held up by further questions from HMRC. Mark your letter with the subject of ‘Tax Repayment Claim’ to help make sure it goes to the right department. You should also include copies of your P45 or P60 if this is applicable to your situation. You may also want to include a completed R38 form to pre-empt the chance that HMRC may request this in order to provide a refund.

When can I claim a tax refund?

You can make a claim for a tax refund using one of the methods described above at any point in the year when your circumstances have changed and means you are likely to have overpaid tax for the tax year. However, where you receive a tax rebate in the middle of a tax year, you may well have further tax adjustments should your circumstances change again. For this reason, HMRC issue out P800s after the end of a tax year. It is also why people who need to complete a self-assessment tax return are recommended to do so as soon as possible so that they can claim any available tax rebate faster.

However, time restrictions are in place for how far back you can go when making a claim for a tax refund. The maximum length of time is 4 years from the end of a tax year. This means that where you overpaid tax in the tax year 2022/23, you must make a claim for a refund by 5 April 2026. After this, you’ll only be able to claim a refund where there it is clear that an error was made by HMRC under their ‘extra-statutory concession B41’ regulation.

How long does it take to receive a tax rebate?

This is one of the most popular questions asked. Unfortunately, the answer can be frustrating with a broad timeframe of between 5 working days to 8 weeks. This is all dependent upon how you made the claim (online or paper form), what time of year you are requesting the refund (where HMRC are particularly busy it’s not uncommon for there to be long delays), and whether HMRC decide to make any security checks. Whilst you may only be making a single claim for one particular tax year, HMRC have the ability and may wish to take the opportunity to review all other ‘open’ tax years to check that correct taxes have been paid. If this happens, the process for a refund could take much longer. Not only that, but if they find that you have underpaid tax in any of the open tax years, your overpayment will be used to offset against that amount and excess will need to be paid.

Should you need any help in claiming a tax refund because you need to complete self-assessment tax returns, please use the contact form below.