What if I pay too much tax?

Updated on 10 November 2016

This section looks at what to do if you have paid too much tax on your employment income and what the time limits are for making a claim.

When might I get a tax refund automatically, and when might I need to claim one?

HM Revenue & Customs’ (HMRC) reconciliation system should aggregate pay and tax details after the end of the tax year and HMRC may issue you with a tax repayment automatically. You should also receive a P800 tax calculation. It is important that you check the calculation and that the repayment is correct. If you receive a P800 calculation, you might not need to claim a refund of tax.

This section is for you if you think you are due a refund, but do not want to wait for a P800 calculation, or if you think you will not receive a P800 calculation.

How do I claim a refund for the current tax year?

If you receive employment income or pension income and pay tax through the Pay As You Earn (PAYE) system you may sometimes pay too much tax. There are various reasons for this. HMRC provide a list of typical reasons on GOV.UK for an overpayment of income tax arising on employment income.

There is more information on what to do if you are still working but you think you have overpaid tax through PAYE in the current tax year in the 'tax basics section'.

This includes detail on the information you need to gather together before contacting HMRC and what records you should keep.

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How will I get my emergency tax back?

PAYE is normally worked out on a cumulative basis. This means that it takes into account income you have already earned in the tax year rather than just looking only at what you earned in a single pay period. If you cannot produce a form P45 when you start a new job, your employer will ask you for new starter information. This gathers relevant information from you to help HMRC recalculate your tax code. In the meantime, there is an ‘emergency’ tax code is used, which enables your employer to pay you without a proper tax code. As soon as your proper tax code is confirmed, and provided the tax year has not ended, the payroll should make the relevant adjustments to repay any overpaid emergency tax in-year.

Example

Emily starts a new job in September 2016. She has not got a form P45, but has been working earlier in the year. She completes the new starter information checklist, and her new employer uses 110L M1 as an emergency code.

So, each month under 1100L M1, Emily is allocated one-twelfth of her personal allowance.

September

She starts off in September with £917 of allowances (£11,000 divided by 12). She earns £2,000, so her tax liability is £216.60 (£1,083 at 20%).

October and November

In October and November, she gets another £917 of allowances in each month. Again she earns £2,000 each month, so her tax liability is £216.60 each month.

December

In December, Emily does not work as she is on holiday. HMRC confirm to Emily’s new employer, that in her first job she earned £4,500 and paid £500 tax and that her normal tax code is 1100L.

As the M1 restriction has now been removed, Emily’s pay and tax details can be worked out on a cumulative basis. Her employer adds together all her pay to date in 2016/17 (£4,500 plus £6,000), which totals £10,500. The employer works out how much tax free pay Emily should have had by this point in the tax year (£917 x 9 = £8,253). Emily’s tax liability to date is therefore £2,247 x 20% = £449.40. Emily has paid tax of £500 plus £216.60 x 3 = £1,149.80. Emily will get a refund of £700.40 through the payroll in December.

January, February, March

As the wrinkle has been ironed out, going forwards, Emily will have £917 to set against her monthly income of £2,000, resulting again in tax liabilities of £216.60 each month.

At the end of the tax year, Emily’s total income will be £16,500. Her total tax paid will be £1,099.20. If we set Emily’s personal allowance (£11,000) against the £16,500 and apply the 20% basic rate of tax to the balance, we can see that Emily paid the correct amount of tax.

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How do I claim a refund if I have stopped working part way through the tax year?

If you have stopped work part way through the tax year and know that you are not going to have a continuing source of taxable income, you should be able to claim an in-year tax repayment using form P50.

You may also be able to use form P50 to claim a refund where you become unemployed and know that you definitely will not be working again for at least four weeks. If you start work again some adjustments may be needed over the rest of the tax year to take into account the fact that you have already had an in-year refund.

You can complete form P50 online, which also means that you should not need to send in copies of your P45 (the form that is given to you by your employer when you leave employment with them). However, if the details on your form P50 do not match HMRC payroll records then you may be asked to send HMRC parts 2 and 3 of your P45.

If you do not complete Form P50 online then you must send parts 2 and 3 of your P45 together with form P50 to HMRC. If you are entitled to a repayment of income tax, HMRC will send it to you – this may be by cheque in the post, or direct to your bank account if you so request.

You cannot use form P50 if you are claiming, or intending to claim a state benefit such as jobseeker’s allowance (JSA).

Instead, if you start to claim JSA, for example, you need to let Jobcentre Plus have your form P45 from your paid work. They will then put the details onto their computer. If you have already paid some tax under PAYE in the year, you will not get this refunded until the earlier of:

  • ceasing to claim JSA – in which case your refund comes from Jobcentre Plus;
  • the end of the tax year – in which case you have to liaise direct with HMRC for your refund.

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How do I claim a refund if I leave the UK part way through the tax year?

If you are not a self assessment taxpayer, you might be able to claim a refund by following the guidance set out in the 'migrants and tax section

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How do I claim a refund after the end of the tax year and for previous tax years?

If you think you have paid too much tax through your employment and the end of the tax year in which you overpaid tax has already passed, you can make a claim for a refund by writing to HMRC.

There is more information on how to do this, including example letters, in the ‘tax basics section’.

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What are the time limits for claiming back overpaid tax?

The time limits for claiming back overpaid tax are set out in the 'tax basics section'.

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What can I do if I am too late to make a claim for repayment?

Claiming back tax for 'closed' tax years – Extra-statutory Concession B41

There is information on what to do if you miss the normal time limits for making a claim for repayment of tax in the ‘tax basics section'.

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Where can I find more information and examples?

There is information on the GO.UK website on:

There is more information on how to claim a refund of tax in the ‘tax basics’ section of this website:

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