Claiming a tax refund
It is a common assumption that if someone overpays tax, HM Revenue and Customs will automatically return the excess. In practice, this is not always how it works. Where too much tax has been paid, the responsibility often falls on the taxpayer to make a claim in order to receive a refund.
Why an overpayment may arise
There are a number of situations in which an individual may end up paying more tax than necessary. For instance, a taxpayer within the Self Assessment system who makes payments on account may overpay if their circumstances change and their income drops during the year.
Employees can also find themselves overpaying. This might happen where an incorrect tax code has been applied, or where they have only worked for part of the tax year and have not fully utilised their Personal Allowance.
How to check if you’ve overpaid tax
There are several ways an overpayment of tax may be identified. Individuals who do not complete a Self Assessment tax return but have paid too much will usually be notified by HM Revenue and Customs. This typically comes in the form of a P800 calculation or a Simple Assessment letter, generally issued between June and March after the end of the relevant tax year. The correspondence will confirm the overpayment and explain how to claim a refund.
For those within Self Assessment, a separate notification is not usually issued. Instead, any overpayment often becomes apparent when completing the tax return. If the return is prepared using HMRC’s online software, it is worth noting that the initial calculation does not factor in payments already made. Once these are taken into account, it may become clear that too much tax has been paid.
It is also possible to review your position at any time by checking your Personal Tax Account online or through the HMRC app, which can provide an up-to-date view of your tax affairs.
How to claim your tax refund
If a refund needs to be claimed, there are several straightforward options available. A claim can be submitted online using the service on the GOV.UK website, or via the taxpayer’s Personal Tax Account or the HMRC app. In most cases, refunds requested online are processed within around five days.
Where a tax calculation letter confirms that a cheque will be issued, there is no need to take further action. The cheque is typically sent within 14 days from the date shown on the letter.
For those within Self Assessment, HM Revenue and Customs may not release a repayment if another tax liability, such as a payment on account, is due within the next 45 days. In these circumstances, the overpayment is usually set against the upcoming bill instead.
Interest may also be added to overpaid tax. This is calculated at 1% below the Bank of England base rate, with a minimum rate of 0.5%.
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