What Happens If I Pay Too Much Tax?

For both employed and self-employed people, it is important to understand how to check if you have overpaid tax, whether HMRC will automatically give you a refund, and what steps are needed to reclaim the tax. This guide explains everything you must do to get the money back and ensure you get all of what is rightfully yours.

What is a tax rebate?

A tax rebate is a refund directly from HMRC when you have paid more tax than you should. This can occur when you have not been put on the correct tax code, if there was an income change during the year or if certain allowable expenses were not included. 

Whether it is employment income, earnings from self-employment, or savings and investments, for example, a rebate is always good news because it returns money in excess of what you have paid in tax. You can take the rebate as a check, or it will be deducted from your future tax liabilities. Make sure to monitor your tax records so that you can claim any overpaying taxes on time.

How do I know if I’ve paid too much tax?

The best place to start if you are paying too much tax is to understand your tax code – it is the basis for deducting money from your income. That means if you are using the incorrect code and not considering allowances or benefits, you could be overpaying. Check your payslips and an annual P60 or P45 document to see how much you paid in tax, ensuring it is no more than it should be.

Compare these with your personal allowance and tax brackets. Overpayment can also occur if you change jobs mid-year, receive untaxed income, or claim certain expenses. If anything seems incorrect, use HMRC’s tax calculator or contact them directly to confirm and address overpayments.

Does HMRC automatically refund overpaid tax?

Although not all overpaid taxes will be refunded automatically, HMRC keeps track of all the tax payments, and if they find any extra payments, they will issue them back to you as soon as possible. Employees usually have their tax codes adjusted the following year as HMRC looks to avoid further overpayments. 

However, you must take responsibility for getting a refund of any tax you have overpaid during the current tax year. If you think you have overpaid, you may need to manually examine your tax documents and make a claim. Make sure that a refund has been made, and check the new amounts on your payslips/ tax code to ensure they are correct.

How do I reclaim if I have paid too much tax?

There are three ways you can reclaim overpaid tax:

Reclaiming tax on employed income

If you think you have overpaid income tax from your job, the first thing to do is check that the correct tax code has been used and that your payslips have been calculated correctly. If you have been overtaxed due to an error in your tax code, then you can simply request a refund from HMRC. 

This can be done by completing either a P50 if you have stopped working or a P800 form if HMRC has identified the overpayment. If you’re registered, you might need to send a self-assessment tax return. Make sure you have your P60, P45, and payslips to hand so that your Wage Complaint can be processed promptly.

Reclaiming tax on self-employed income

If you are self-employed, you will need to check your self-assessment tax return for any errors or missed expenses to recover overpaid tax. If you have paid too much, you can submit an amended return to HMRC, providing evidence of your correct income and expenses. 

You might also find that you need to complete a “Claim a tax refund” form on the HMRC website. Remember to retain all related information, such as receipts and invoices, to evidence your claim. If approved, you will receive a refund to your bank account, and HMRC takes 6-8 weeks on average to process the request.

Reclaiming tax on savings and investments

You could be owed tax back on your savings and investments. If this is the case, a refund claim can be filed with HMRC. Before you even begin, make sure to have your interest statements and any tax-related documents. You could have paid too much tax if your savings interest is over your personal savings allowance. 

For interest from a savings account, use the R40 form. For dividends or other income, use the R43 form. This claim should be done through a couple of forms (you can find these online), which you fill out, along with the evidence needed, and send to HMRC, who will then make your claim for you and usually refund the money within a few weeks.

Summary

While managing overpayments can be difficult, it is important that you have a good idea of how the process works and what you need to do in order to get your money back. If you are working, a self-employed individual, or simply earning through your savings and investments, then every situation has its own steps for receiving refunds.

For a stress-free experience and expert help, you should opt for Braant. Our team will assist you in assessing your tax situation and proceed with the claims you are entitled to without losing money.

FAQs

If you still want to find out some more information about tax refunds, you can find the answers to our frequently asked questions here:

How long will it take to claim a tax refund?

The time to receive a tax refund varies. Typically, HMRC processes claims within 4 to 6 weeks. However, it may take longer during busy periods or if additional information is required to process your claim.

How far back can I claim a tax overpayment?

You can claim a tax overpayment for up to four years from the end of the tax year in which the overpayment occurred. For example, claims for the 2019/20 tax year can be made until April 2024.

Can I reclaim tax if I leave the UK?

Yes, you can reclaim tax if you leave the UK. You may be eligible for a tax refund on any overpaid tax during your residency. Complete the relevant forms and provide necessary documentation to HMRC for processing.