Overpaid income tax? Here’s how to claim a tax refund from HMRC

Paying bills is a necessity of life. However, you may be surprised to know that occasionally people overpay their income taxes, resulting in millions of people paying more than they should.

If you feel or know you have overpaid, you can file for a rebate and receive your money back. It is usually up to you to reclaim an income tax, so you won’t get reimbursed automatically for any tax you unnecessarily paid.

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How is your tax obligation calculated?

The most obvious cause for a tax rebate is that you have paid more income tax.

Over the age of 16, you will start paying income tax if your earnings exceed the personal tax-free threshold, currently £12,570 for tax year 2021-22.

However, other types of income also count as personal income. It includes everything from pension payments, capital gains, dividend income, interest on investments, and even income from life annuities is considered ‘earned income.’

Due to various sources of income, higher tax rates may apply even if your basic pay isn’t very high. With so many ranges of taxable personal income sources, HMRC relies on your employer and you to provide an accurate tax code and to complete an accurate declaration form to determine how much tax you should be paying.

Nevertheless, miscalculations sometimes occur, so paying close attention to your tax readings is crucial, particularly if you changed employment during the tax year.

How can I overpay income tax when I’m paid through PAYE?

There are several ways your income tax calculation can be incorrect when you’re in PAYE. For example:

  • Your employer is using the wrong tax code
  • You used an emergency tax code at the beginning of a new job
  • You hold multiple jobs
  • You did not work the entire tax year
  • You had other sources of income that HMRC taxes under your tax code, but they decreased during the year, and HMRC did not take the reduced amount into account.
  • Your employment situation changed during the tax year, such as when you switched from full-time to part-time hours.
  • You’re a student who only works over the holidays.
  • Human error: HMRC is made up of real humans who can make some mistakes.

HMRC cannot perform the proper calculation if they lack all the information regarding your position. Because of this, paying attention to your tax code and any information you receive from HMRC is essential.

Paying income tax through Self-Assessment

If you use the Self-Assessment system to file your taxes, you can still request a refund of overpaid income tax.

You request a refund for paying more income tax when you submit your Self-Assessment tax return as part of the overall procedure. It works the same way as claiming other tax breaks and allowances for work-related expenses.

Self-employed taxpayers already understand Self-Assessment and know it is the best option for them when requesting a tax refund.

However, you might not be sure if you must file a tax return. The UK government provides a useful HMRC tax refund check tool to verify whether you need to file a return.

If this is your first time filing a self-assessment tax return, remember the deadline and give yourself a lot of time to register.

When you complete your self-assessment tax return, you’ll be asked to choose whether you’d like your refund paid by check in the mail or bank transfer. You can also choose to apply it to your next tax bill.

Am I eligible for a tax rebate? 

You will be eligible if you have overpaid any tax or have yet to claim some tax refunds, like a uniform tax refund.

You can submit a claim for a refund of any overpaid taxes in the arrears of up to four years, and you can also notify HMRC in advance of your allowance to change your tax code for future earnings.

Based on your employment situation, you might also be eligible for some refunds; however, you might have to pursue these refunds yourself. From several travel and accommodation expenses to leading professional refunds, you may be eligible if you have to foot the expenses of these employment-related job expenditures. For all eligibility details, visit the HMRC website.

Hire a Tax Advisor

Work with a London-based accountant for tax, accounting, payroll, & EIS/ SEIS needs.

Have a question? Call us on
0203 900 3500
Monday to Friday 9am – 5pm

How to claim tax refund?

If you have received P800 informing you that you are entitled to a tax refund, you can quickly and easily submit a claim online through the Government Gateway.

The Government Gateway will take you through a few questions to check your eligibility before you can apply. You’ll then be able to access your tax information and track your refund progress online.

If you wish to speak to someone, there is a helpline service available on the HMRC tax refund check uk website, which has postal support too.  

You can still request a tax refund from HMRC even if you haven’t got a P800 by calling them or contacting them through their online portal.

But what if I’ve Underpaid my Paye Income Tax?

The negative part of overpaid tax rebates is the worrying chance of having underpaid. Now you owe HMRC. However, they don’t ask for it back in lump sum right away.

If you pay income tax using a pension provider or PAYE and you owe up to £3,000, HMRC will deduct it in instalments over the following tax year. As a result, your tax code might be modified.

HMRC will send you a letter explaining your choices if you owe more than that or are in a different employment situation.

Final thoughts

It’s easy to overpay taxes. But whether you have overpaid on your income or are eligible for refundable tax benefits, you can get a rebate or tax refund to get some of your finances back. Follow the process mentioned above to submit a hassle-free tax return.

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