Are you owed a 2019/20 tax refund?

Why might I need to think about claiming a tax refund?

The coronavirus (COVID-19) outbreak is having significant financial impacts on individuals and businesses. Many people have seen their circumstances change suddenly and unexpectedly. You might, for example, have stopped work and stopped being paid – if, for example, you lost your job. Or you might have taken some money out of savings that has a tax impact, such as drawing on a pension.

The Pay As You Earn (PAYE) system that is used to tax wages and pension income works best if people’s circumstances do not change. That is, if you work in a single, steady job or take a regular stream of pension income for the full tax year.

If something different happens, it might mean that you do not pay the right tax in the year. The system should catch up with you eventually, but if you have paid too much tax and are struggling financially, you might think about trying to get your refund sooner.

Why might I have paid too much tax if I stopped working before 6 April?

If you stopped working and didn’t receive any further income, you might have paid too much tax because the personal allowance (£12,500 in the 2019/20 year) is usually divided throughout the year so you receive a proportion in each pay packet.

If you stop work part way through a tax year, you will not have received your entire tax-free allowance.

Example:

Luke is on a zero hours contract and is paid weekly. Luke's last payslip (dated 13 March) indicated he had earned £14,560 and paid £556.20 in tax. On 16 March, his employer told Luke there is no work for the foreseeable future.

At the end of the tax year Luke's tax position will be:

Earnings £14,560

Less PA (£12,500)

£2,060 @ 20% = £412

We can see that Luke has overpaid £144.20 in tax (£556.20 less £412). This is because up until 13 March (week 49 of the tax year), Luke had only been given 49 chunks of his personal allowance (£11,778), whereas actually he is due £12,500.

What if I was furloughed?

You may have stopped working in 2019/20 but continued to be paid due to the furlough scheme set up by HMRC to help employers keep staff on payroll during the coronavirus outbreak.

In this case, given you will probably have continued to be paid normally (albeit at a reduced rate), you are unlikely to be due a tax refund because of this alone, unless having your pay dropped to 80% meant that you earned less than tax free amount for that pay period. If this happens, as PAYE tax normally works cumulatively, you should have already been given any refund for the 2019/20 tax year, by your employer through the payroll.

Example:

Jenny has a job in which she normally earns £1,250 a month. She usually pays around £42 pounds a month in tax. By the end of February 2020, her total pay is £13,750 and her total tax is £460.

Jenny is furloughed from 1 March. Her employer pays her 80% of £1,250 at the end of March, so £1,000. This means that at the end of March, which is also essentially the end of the tax year, her total pay is £14,750. The tax due on that amount is £450. As Jenny has already paid £460, she should have received a £10 tax refund with her March pay.

If you weren't furloughed, but had your hours or income cut towards the end of the tax year, the same reconciliation may well have occurred in your March pay. You can usually spot a tax refund on your payslip as it will be in brackets or have a - sign (to indicate a negative amount) or have the letter (R) next to it – for Refund.

Why might I have paid too much tax if I took a pension before 6 April?

There is not usually much problem with PAYE on pensions if, for example, you stop working for a single employer and then take a single, regular source of pension income. In that case, your PAYE code from your job would usually move over to your pension provider (when you hand your P45 to them) and everything largely carries on as it did before.

However, this happens to very few people these days. Many pensioners have various pension ‘pots’ into which they have saved with different employers throughout their working life. Pensions flexibility (or pensions freedom as it’s also sometimes known) allows people to take some pension savings as lump sums rather than as a regular income. The PAYE system isn’t well suited to this way of taking income, for the same reasons as shown in our example of Luke above – that is, the system assumes you have a regular income.

Our pensions flexibility guidance explains what happens when you take pension lump sums under those rules. The tax deduction is slightly different if you take a small pension lump sum.

How can I check if I am due a refund?

Once you have received your final pay for the 2019/20 tax year, you should be able to work out if you are due a tax refund. We set out how to prepare a manual calculation in our guidance.

How do I get a refund?

1. Wait for HMRC to send it to you automatically

At the end of every tax year, HMRC should do a ‘reconciliation’ – a calculation of how much tax you owe for the year and how much you have paid. Any difference is then notified to you via a P800 calculation.

If this shows you have paid too much tax and are due some back, HMRC will send you a refund.

P800s are usually issued in the summer months following the end of the tax year. 

2. Ask HMRC to do the calculation and issue the refund

If you do not want to wait until the automatic calculation is done, you should be able to contact HMRC and prompt them to reconcile your position and issue your refund. There is more information on how to do this, including example letters, in our tax basics section.

You should note that if you are expecting a P11D (a benefits in kind statement) for 2019/20, these are not due until 6 July 2020, so HMRC may not be able to reconcile your position/issue your refund before then.

If you have taken a pension lump sum, see our pensions flexibility and small pensions guidance for information about claiming a refund.

Please do be aware that HMRC are being contacted by a lot of people who have been affected by the coronavirus, so even if you do contact them about a tax refund, it might not be sent to you very quickly.

Can I get help with claiming a refund?

You should be able to claim a refund from HMRC yourself, but if you are having difficulty, read our getting help page, which includes details of how to contact the tax charities for support if you are on a low income.

Some companies specialise in claiming tax refunds and charge for these services. Read our guidance if you are considering using one of these.

Also, please watch out for tax refund scams, as fraudsters are using coronavirus as a ‘hook’ to try to catch people.

More information

We have produced detailed information for those affected by the coronavirus, with pages for employees whose work has been affected and people drawing on pensions.