How do I claim back overpaid tax?


It’s now 3 months since the tax year ended on 5 April 2016. If you paid too much tax, how do you get it back??

You might have paid too much tax for a number of reasons. For example:

  • You had the wrong tax code as an employee, for example because your benefits at work changed
  • You stopped working part way through the year, perhaps to start a new business
  • You didn’t claim all of the tax reliefs you were allowed
  • You were a non-taxpayer but had tax deducted from your savings

Whatever the reason, here’s how you get it back.

Wrong tax code for employees

As an employee, you’re given a PAYE tax code. This determines how much tax-free income you get. As a starting point, that was £10,600 last year (and £11,000 in the 2016/17 tax year).

However, HMRC adjust it to reflect anything out of the ordinary, for example benefits-in-kind or having two sources of income.

The standard PAYE coding last year was 1060L. This year it’s 1100L. If your code is different, you should check the calculation that HMRC send you. If the code’s wrong, you’re paying the wrong tax.

Last year’s tax
If you’re not sure how much tax you should have paid, you can check on HMRC’s website here.

You should receive a tax calculation from HMRC in the next couple of weeks – these are sent out in late July each year. The form is called a P800. The P800 will show if you’ve overpaid. If you have, HMRC should refund you within 14 days. This is automatic, but you may want to chase HMRC if you haven’t received it by the middle of August.

If you don’t receive your P800, or don’t want to wait for HMRC, you can claim online by writing to HMRC or through your online account.

This year’s tax
Your PAYE coding is usually based on last year’s figures, so it’s worth checking nothing has changed this year. For example, one of our clients has recently had their code changed to tax a benefit they receive from their employer…..but they actually stopped getting that benefit in June 2015! Therefore, they were paying too much tax until we asked HMRC to reset the code for 2016/17.

Working for part of the year

Many of our clients leave a job to set up their own business. This often means they’ve overpaid PAYE because it’s been calculated on the assumption that the employee works all year.

If you were due £10,600 of tax-free income, PAYE calculations are based on you having £883 tax-free for 12 months. If you leave work, you haven’t had your full year’s entitlement.

If this is the case, the best thing to do is file your 2016 Self-Assessment Tax Return as soon as possible as this will trigger the rebate.

If you left a job and are no longer working, you won’t need to file a tax return. Instead, you can claim a refund by completing form P50 if you won’t be working for at least four weeks and are not claiming benefits.

Claiming tax reliefs

If there are tax reliefs you didn’t claim, you can submit your tax return to trigger the rebate.

If you’re an employee, this might be expenses that you pay for work. Examples include uniforms or professional subscriptions. You can also claim tax relief on mileage if your employer doesn’t pay you the full HMRC allowance (45p per mile for the first 10,000 miles and 25p per mile thereafter).

How do you claim these?

  • If the expense are more than £2,500, you must submit a tax return
  • If the expenses are less than £2,500, you can fill in a form P87
  • If the expenses are less than £1,000, you may be able to claim by phone

Tax deducted from savings income

If you’re a non-taxpayer but you had tax deducted from your savings income in 2015/16, you can reclaim it by completing form R40.

How long does it take to get the refund?

HMRC state that it can take up to five weeks for an online claim or six weeks for a postal claim. If you haven’t had the cash by then, chase them up.

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Any questions?

If you’d like a meeting or a Skype call with a Liverpool accountant to discuss this, please give us a ring on 0151 380 3800 or drop us an email at [email protected].

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Added by Jon Davies
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