What if I pay too much tax?

Reminder: how PAYE works

First things first! Let us have a quick recap at how Pay As You Earn (PAYE) works.

Nearly everybody is entitled to earn a tax-free amount each year. This is called the ‘personal allowance’. In 2023/24, this is £12,570 (in 2022/23, it was also £12,570). Under PAYE this £12,570 amount is given to you in chunks to set against your income. So, if you are paid monthly, you would be given £1,048 of tax-free pay each pay day (£12,570 divided by 12), if you are paid weekly, £242 (£12,570 divided by 52) and so on.

Essentially PAYE spreads your tax bill over the tax year, rather than you having to pay it in one lump sum. HMRC use a tax code to tell your employer or pension provider what tax-free allowances you are entitled to so that they can calculate tax at the appropriate rate on the balance. The standard tax code in 2023/24 is 1257L (essentially £12,570 with the last 0 dropped off and a letter added).

If you live in Scotland and are a Scottish taxpayer, the standard tax code in 2023/24 is S1257L. If you live in Wales and are a Welsh taxpayer, the standard tax code in 2023/24 is C1257L.

Where HMRC need to collect a little extra tax from you for whatever reason, they essentially reduce the amount of tax-free pay that you are allowed – meaning that your employer calculates tax on slightly more money. The opposite happens where HMRC need to collect a little less tax from you. In such cases, you will see a non-standard tax code, for example 1202L or 1084L.

You can find out more about the PAYE system, including some examples of non-standard tax codes and how they are made up on our page How do I check my coding notice?.

How do I claim back tax I have overpaid through PAYE on wages?

If you receive employment income and pay tax through the Pay As You Earn (PAYE) system you may sometimes pay too much tax, for example, as a result of being on emergency tax when you start a new job or because you stop work part way through the tax year.

In many cases at the end of the tax year, too much tax has been paid simply because of the way the PAYE system works and no-one is ‘at fault’.

Tax refunds most commonly arise from the following circumstances:

• If you work less than the complete tax year
• If you have been working on a casual basis
• If you are a student, working in the holidays

This is because in any of these circumstances you will probably only have received part of your tax-free personal allowance under PAYE when actually you are entitled to a full year’s amount.

Example

Luke is on a zero hours contract and is paid weekly. Luke’s last payslip in the 2022/23 tax year (dated 16 March 2023) indicated he had earned £14,560 and paid £556.20 in tax. On 17 March 2023, his employer told Luke there was no work for the foreseeable future.

At the end of the 2022/23 tax year Luke’s tax position is:

Earnings £14,560

Less PA (£12,570)

Tax owed: £1,990 @ 20% = £398

We can see that Luke has overpaid £158.20 in tax (£556.20 less £398). This is because up until 11 March (week 50 of the tax year), Luke had only been given 50 weeks’ worth of his personal allowance (£12,087), whereas actually he was due £12,570.

In such cases, HMRC’s automatic reconciliation system should aggregate your 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, as set out in the tax basics section.

P800s are usually issued in the summer months following the end of the tax year. But what if you do not want to wait for a P800 calculation, or you don’t receive a P800 calculation for the year in question?

If you have paid too much tax through your employment and the end of the tax year in which you have overpaid tax has passed, you should be able to prompt HMRC to reconcile your position/issue your refund by contacting them. There is more information on how to do this, including example letters, in our tax basics section.

There is more information on what to do if you think you have overpaid tax through PAYE in the current tax year, in the tax basics section.

See also the questions below, How will I get my emergency tax back?, How do I claim a refund if I have stopped working part way through the tax year? and How do I claim a refund if I leave the UK part way through the tax year?. 

How will I get my emergency tax back?

As explained on our How do I check my coding notice? page, if you cannot produce a form P45 when you start a new job, your employer will ask you for new starter information. This enables your employer to pay you without a proper tax code in place, however it can mean that you overpay tax. 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 2023. 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 1257L M1 as an emergency code.

So, each month under 1257L M1, Emily is allocated one-twelfth of her personal allowance.

September

She starts off in September with £1,048 of allowances (£12,570 divided by 12). She earns £2,000, so her tax liability is £190.40 (£952 at 20%).

October and November

In October and November, she gets another £1,048 of allowances in each month. Again she earns £2,000 each month, so her tax liability is £190.40 each month.

December

In December (which is month 9 of the tax year), 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 1257L.

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 2023/24 (£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 (£1,048 x 9 = £9,432). The difference is £1,068. Emily’s tax liability to date is therefore £1,068 x 20% = £213.60. Emily has paid tax of £500 plus £190.40 x 3 = £1,071.20. Emily will get a refund of £857.60 through the payroll in December.

January, February, March

As the wrinkle has been ironed out, going forwards, Emily will have £1,048 to set against her monthly income of £2,000, resulting again in tax liabilities of £190.40 each month.

At the end of the tax year, Emily’s total income will be £16,500. Her total tax paid will be around £785. If we set Emily’s personal allowance (£12,570) 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.

If this payroll adjustment does not happen before the end of the tax year, then HMRC’s ‘P800’ reconciliation system should aggregate your pay and tax details after the end of the tax year and HMRC should issue you with any tax repayment automatically. 

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 2023/24, you will pay tax on your earnings over £12,570 (your personal allowance – for more information on allowances, see: What tax allowances am I entitled to?).

Example

Josie earns £12,650 in 2023/24. After the personal allowance is deducted, she will have taxable income of £80, which at 20% means that she will pay £16 tax. She has qualifying expenses of £50 which she has paid for from her salary. By putting in a tax claim for this, she will not get the £50 back from HMRC, but will get the tax back that she has paid on the £50. As she has paid tax at 20%, this will be £10. Even though she will also have paid 12% National Insurance on the £50, there is no National Insurance relief available.

If Josie’s expenses were £200, her tax claim would be restricted to £80 and her refund restricted to £16.

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 through the Government Gateway
• 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 - see here for more information). If you changed jobs during the year, you might need details for all relevant employments. If you do not have an ‘employee number’ you should insert ‘unknown’ otherwise you will not be able to progress.
• Details of the expenses you wish to claim for example 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 P87 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 will take a fee from any repayment you get. If you are thinking of paying a tax refund company to help you make the claim, we strongly recommend you read our guidance

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.

You would receive a tax refund cheque for any past tax years, and would get your tax code adjusted for the current and future years – the relief will be given automatically in your pay packets so you will not need to claim again (although you should make sure you check your PAYE coding notice carefully to ensure that the relief has been ‘coded in’ properly).

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 but then start working again, provided you are on a cumulative tax code (either because you are continuing with the same employer or you have a new employer but gave them your P45 from your old job) this will give you the benefit of unused personal allowances from the period when you were not working. You could expect to get a refund of taxes paid earlier in the year, through the payroll (a bit like what happens in an emergency tax scenario once a proper tax code is issued) or pay slightly less tax to begin with once you start work again, until the spare allowances are used up.

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 (including taxable benefit income), you should be able to claim an in-year tax repayment using form P50. This means your refund will be paid within the tax year, rather than having to wait until the end of the tax year.

You should not need to send in your P45, however if the details on your form P50 do not match HMRC payroll records, then you may be asked to send it in – so keep it somewhere safe.

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 after that, 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.)

Once you have sent in a P50, 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 can also nominate someone else to receive the refund and it can be paid by post or directly into their bank or building society account.

You cannot use form P50 if you are claiming, or intending to claim, a state benefit such as jobseeker’s allowance (JSA) or contributory/new style employment and support allowance. This is because some of these benefits are taxable and so will affect the amount of any refund that you can claim.

If you are starting to claim jobseeker's allowance or employment and support allowance after leaving your job, you need to give your form P45 to the DWP. They will then put the details from your earlier paid work onto their system. If you are due a tax refund from your paid work, you will not get this refunded until the earlier of:

• ceasing to claim jobseeker's allowance or employment and support allowance – in which case your refund comes from Jobcentre Plus
• the end of the tax year (for continuing claims).

If DWP do not issue your refund automatically, you may have to contact HMRC to claim it.

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, and are leaving the UK to live abroad permanently or are going to work abroad full-time for at least one full tax year, you might be able to claim a refund in respect of your pre-departure employment income. This is because you will probably have unused personal allowances (like the example Luke above). You can claim this refund by completing form P85 ‘Leaving the UK – getting your tax right’ to HMRC. You can find the form on GOV.UK.

If you are leaving the UK temporarily, then see the guidance in our What if I work abroad temporarily? section.

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.

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.

Where can I find more information and examples?

There is a tool on GOV.UK that will help you work out how to claim a tax refund in various scenarios, including employment related scenarios.

Those who are due a tax refund because of employment expenses, may find our news article How to claim tax relief for your work expenses useful

For guidance on your tax refund position if you stop work because you are made redundant, see our guidance in the employment section.

If you want information on tax refunds in other situations, go to the tax basics section.