Complete guide to claiming back tax.

Each year, roughly £800 billion is raised by the UK government from taxes and other sources, accounting for 37% of the size of the UK economy.

For the majority of us, paying tax is a standard part of life. However, many have paid too much tax, all without realising. Out of everyone that pays tax, one in three in the UK are entitled to a tax refund.

But how do I know if I’m due to claim back tax? Is it free to do it? What about if I have stopped working? This guide will cover all you need to know about claiming tax back.

How Do I Know If I’ve Paid Too Much Tax?

For those working or receiving a pension, you are allocated a tax code by HMRC. This tax code is used by your employer or pension provider to calculate exactly how much tax you should be paying.

However, if you are placed on the wrong tax code, you may be paying too much or too little tax. This is why it is so important to ensure you have the right tax code.

Is It Free To Claim Tax Back?

Yes. To claim tax back from HMRC, it is free.

Some companies will help you to reclaim your tax overpayments in exchange for a cut of your rebate, however, the process is simple. These companies should only be used when you think you can’t claim on your own or for very complex tax affairs where a qualified accountant would be advised.

Can I Claim A Tax Refund For The Current Tax Year?

If you are paying tax through the PAYE system and receiving employment income or a pension income, there is a chance you are paying too much tax. HMRC has a list of reasons why you may be overpaying your tax.

If you think you have overpaid tax for the current tax year, you should contact HMRC before the end of the tax year. You can call them on 0300 200 3300. Some things you will need before calling are:

Your personal details, such as your full name, address, date of birth and National Insurance number.
Details of your employers or pension providers, such as the PAYE scheme reference number found on your payslip.
Estimates of earnings and pensions for the current tax year.

We recommend keeping a note of the date and time of the phone call, the name of the advisor you spoke to and the conversation you and the advisor had. To support your claim, more information may be needed.

HMRC may also issue a new tax code after the claim process, with any refunds automatically added to your wages or pension, resulting in a lower tax deduction or a tax refund.

What Is A Personal Allowance?

Each year from the money you earn, income tax is taken. Before paying tax, there is a specific amount of money that cannot be taken, called your annual personal allowance. Below is a table showing the personal allowance amounts.

Allowances	2021 to 2022	2020 to 2021	2019 to 2020	2018 to 2019
Personal Allowance	£12,570	£12,500	£12,500	£11,850
Income limit for Personal Allowance	£100,000	£100,000	£100,000	£100,000

For those earning more than £100,000, tax-free personal allowance is gradually withdrawn and for those earning earn more than £122,000, there is no personal allowance.

How To Reclaim Tax Overpayments

PAYE

There is a specific tax code that PAYE used to calculate the amount of tax you should pay. If you are paid the same amount each month, the system works well, however, if your pay fluctuates, you are more likely to pay more tax than needed.

Also, if you work seasonally or for the year aren’t employed for the full 12 months, your personal allowance won’t be utilised, resulting in paying too much tax.

You can get an estimate by using the HMRC Tax Checker.

Self Assessment

Those using a Self Assessment tax return can use the same method as PAYE to claim a refund. This needs to be done within 12 months of submitting your Self Assessment tax return.

You can write to HMRC to advise of the changes that need to be made, or use the HMRC website. If your claim is for a refund from a Self Assessment made over 12 months ago, you will need to make a claim and use the following information:

The tax year for the overpayment.
The reason you paid too much tax.
Evidence of you paying too much tax, such as a copy of the return.
A copy of your signature.
The chosen method of receiving any repayment due.

What Is The Deadline To Claim A Self Assessment?

The deadline is 4 years to submit a claim for a Self Assessment refund.

What Do I Do If I Think I Have Paid Too Much Tax On My Pension?

Similar to reclaiming income tax, for a person you will need the following information:

Your payslips
P60
P45
Full pension and benefit payments information

Then, your next steps are to contact HMRC and request an assessment of your tax contributions. Any repayments that are owed to you will be sent in the post.

What Do I Do If I Think I Have Paid Too Much Tax On My Savings?

Usually, before the money is paid into your account, standard savings accounts will automatically deduct any tax from your interest. On the other hand, if your funds are in an ISA, or you have completed an R85 form after informing your savings provider that you do not pay tax, you can avoid this.

To reclaim tax paid on savings interest, the deadline is 5 years. To reclaim tax on your savings, you need to complete an R40 form and contact your tax office.

If I Have Stopped Working Can I Still Reclaim Tax?

If you have been working for numerous months, then stopped working, there is a possibility you might have paid too much tax. If you aren’t considering working again this year or claiming Job Seekers allowance, complete a P50 form. This will allow you to reclaim your tax, getting the full benefit of your personal allowance.

What Do I Do If I Think I Have Paid Too Much National Insurance?

If you have worked numerous jobs in a year, there is a possibility you might have paid too much National Insurance and too much Income Tax. There are circumstances where you can claim back your overpayments.

In certain situations, there is no time limit on when you can reclaim overpaid National Insurance. These include:

When you have worked in two jobs, making contributions on both.
Being both employed and self-employed that has resulted in the overpayment.
If you haven’t paid enough voluntary contributions to count for a qualifying state pension year.

To make a claim, visit the GOV.UK website to find the forms you need to claim. Remember, the type of National Insurance that you need to reclaim will determine which method you use.

However, it is worth noting that there is usually a six-year time limit on claims for those that have wrongly paid or overpaid National Insurance for any other reason.

There is an exception. This is when self-employed earnings are lower than the annual small earning exception limit. In this situation, apply in writing for a refund by 31st January of the following tax year.

How Can I Claim A Refund After The End Of The Tax Year?

If you have missed the deadline for claiming overpaid tax, you can write to HMRC. At the top of the letter, state clearly ‘repayment claim’ ensuring the team at HMRC will prioritise your letter to get it sorted as soon as possible.

To write to HMRC, use the tax office address of your current employer. You can also use the postal address on your most recent correspondence received from HMRC Otherwise, the best address to use is:

HM Revenue & Customs
Pay As You Earn and SA
BX9 1AS

In your letter, make sure to remember to include:

Your full personal details, such as your name, address and national insurance number.
As many details as possible, such as your employment history, dates of employment, PAYE reference numbers for your employers and tax information.
Include your P60s and P45s if you have them, remembering to keep the original letters.
Detail the reason you believe you should be due a repayment.
Sign and date the letter in ink.

Keep a copy of this letter, as well as anything you include in the letter. You should also ask the Post Office for proof of the postage.

How Long Do PAYE Repayments Take?

HMRC advises that it takes roughly four weeks of receipt to process PAYE repayments. There may be security checks, adding more time to the process. To make your repayment quicker, it is recommended to ask HMRC to pay it directly to your bank account.

Include the name of the account holder, sort code and account number when requesting a direct bank transfer. For accounts not in your name, additional security checks may be carried out.