What if I pay too much tax?

Updated on 8 April 2018

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 2018. She lives in Wales, 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 1185L M1 as an emergency code.

So, each month under 1185L M1, Emily is allocated one-twelfth of her personal allowance.

September

She starts off in September with £988 of allowances (£11,850 divided by 12). She earns £2,000, so her tax liability is £202.40 (£1,012 at 20%).

October and November

In October and November, she gets another £988 of allowances in each month. Again she earns £2,000 each month, so her tax liability is £202.40 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 1185L.

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 2018/19 (£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 (£988 x 9 = £8,892). Emily’s tax liability to date is therefore £1,608 x 20% = £321.60. Emily has paid tax of £500 plus £202.40 x 3 = £1,107.20. Emily will get a refund of £785.60 through the payroll in December.

January, February, March

As the wrinkle has been ironed out, going forwards, Emily will have £988 to set against her monthly income of £2,000, resulting again in tax liabilities of £202.40 each month.

At the end of the tax year, Emily’s total income will be £16,500. Her total tax paid will be £928.80. If we set Emily’s personal allowance (£11,850) 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 spent my own money on employment expenses?

First things first, you should make sure that your expenses qualify for tax relief. You can find out more about expenses that you can claim for on our website

Even if you meet the rules, you need to make sure you have paid enough tax to get tax relief. In 2018/19, you will pay tax on your earnings over £11,850 (your personal allowance – for more information on allowances, see: What tax allowances am I entitled to?)

Example

Josie earns £12,000 in 2018/19. After the personal allowance is deducted, she will have taxable income of £150, which at 20% means that she will pay £30 tax. She has qualifying expenses of £100 which she has paid for from her salary. By putting in a tax claim for this, she will not get the £100 back from HMRC, but will get the tax back that she has paid on the £100. As she has paid tax at 20%, this will be £20. Even though she will also have paid 12% National Insurance on the £100, there is no National Insurance relief available.

If Josie’s expenses were £200, her tax claim would be restricted to £150 and her refund restricted to £30.

To get tax relief, you have to make a claim to HMRC, but it is not difficult to do so. If you do not usually have to complete a tax return, a claim can be made on form P87. There are two versions available from GOV.UK:

  • A P87 you can complete and submit online.

    You will find this form in your Personal Tax Account in the PAYE/current year/check your income tax estimate section. To find out how to access your Personal Tax Account, see our website guidance on HMRC’s digital services.
     
  • A P87 that you complete on screen but still have to print it off and post it to HMRC. So you need to have your printer and paper on standby!

    You cannot save a copy of the form and come back to it partly completed. Make sure you have all information to hand before you start, including:
    • The tax year your claim refers to.

    • Your personal details including address, date of birth, and National Insurance number.

    • Your employer’s details including name, type of business, address and employer reference number (you will find this on your payslip or P60). If you changed jobs during the year, you might need details for all relevant employments. If you do not have the ‘employer industry’ or your ‘employee number’ you should insert ‘unknown’ otherwise you will not be able to progress.

    • Details of the expenses you wish to claim e.g. the number of business miles you have travelled.

    • Repayment instructions – that is, the bank account which you want it paid directly into (with bank name, address, account name, sort code, account number) or the address you want a cheque to be sent to (you can also have it paid to a nominee).

If you need further help understanding and completing the form, you can find more information and also an annotated example of form P87 in the ‘Forms’ section of our website.

If you would prefer a paper version of form P87 to complete by hand, then you will have to ring HMRC’s helpline and request that one is sent out to you.

There are plenty of organisations which offer to make the claim for you, but they'll take a fee from any repayment you get.

Where the amount of employment expenses exceeds £2,500, then the tax refund claim must be made through the completion of a more formal self-assessment tax return.

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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 system. 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?

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 GOUK 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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