UK Taxpayers Reclaim £8.3 Billion in Overpaid Taxes, With Average Refund of £943

In the UK, millions of workers face the issue of overpaying taxes each year. This often happens because of incorrect tax codes or not claiming available tax reliefs.

Understanding the process of getting a tax refund is crucial for those who might be entitled to recover their overpaid taxes.

This article explores why people overpay taxes, how to check if you’ve overpaid, and how to claim a refund from HM Revenue & Customs (HMRC).

Why Do Workers Overpay Taxes?

Several factors can lead to workers overpaying taxes in the UK. One of the most common reasons is receiving an incorrect tax code.

Tax codes determine how much tax is deducted from an individual’s earnings through the Pay As You Earn (PAYE) system. If an incorrect tax code is used, it can result in workers paying more tax than necessary.

Here are some situations that may lead to an incorrect tax code:

• Switching Jobs: When someone changes their job, their tax code might not be updated quickly enough, leading to overpayment.
• Transitioning from Self-Employment: If a person moves from being self-employed to a regular employee, their tax records might not reflect this change immediately.
• Multiple Jobs: If someone has more than one job, the tax code may not be adjusted to account for the total income, leading to overpayment.

Apart from these common reasons, other factors that might cause overpayment include:

• Emergency Tax Codes: If a person starts a new job and their tax records aren’t updated in time, an emergency tax code might be applied, which can lead to overpayment.
• Unclaimed Tax Reliefs: Many workers do not claim tax reliefs that they are entitled to, such as work-related expenses or pension contributions, which can reduce their taxable income.

How to Identify If You’ve Overpaid Taxes

To determine whether you’ve overpaid taxes, you should review your payslips, tax codes, and any official correspondence from HMRC. If there are any discrepancies, it’s important to investigate further. The following steps can help you identify overpayments:

1. Check Your Tax Code: Ensure that your tax code is correct. If you’re unsure, you can always contact HMRC for clarification.
2. Review Your Payslips: Compare the amount of tax you’ve paid with what you should have been paying. If the tax seems higher than expected, you might have overpaid.
3. Look for Unclaimed Reliefs: Check if you missed out on claiming any tax reliefs, like for work-related expenses or pension contributions. These can lower your taxable income and reduce the amount of tax you owe.

HMRC’s Role in Tax Refunds

Each year, HMRC reviews the tax records of individuals and businesses. If it finds that a worker has overpaid their taxes, it will typically send a P800 letter to the taxpayer. This letter details any overpaid taxes and the amount eligible for a refund.

HMRC usually sends P800 letters between June and October after the end of the tax year, which runs from April 6 to April 5.

If you suspect that you have overpaid and haven’t received a P800 letter, you can check your tax records on HMRC’s online portal or contact them directly for assistance.

How Long Does It Take to Get Your Refund?

The time it takes to get a refund can vary. In some cases, it can take just a few days, while in others, it may take several weeks.

The process can be delayed due to factors such as the complexity of your tax situation or the need for further investigation into your records.

Martyn James, a consumer rights expert, mentioned that the process can sometimes be frustrating, as it may require long phone calls with HMRC, and automatic refunds may take years to be processed.

Therefore, it’s advisable to proactively check your tax details and take action early to avoid unnecessary delays.

Self-Assessment Tax Refunds

Self-employed individuals or those with additional income streams must file a self-assessment tax return. This can lead to overpayments if mistakes are made in estimating payments or tax deductions.

In the 2022/2023 tax year, approximately 2.32 million self-assessment taxpayers were issued tax refunds, totaling £5.2 billion.

To avoid mistakes, self-employed individuals should carefully review their income and expenses before submitting their tax return.

Common errors include underestimating business expenses or overestimating income, both of which can lead to overpaid taxes.

Beware of Third-Party Tax Refund Services

While many private companies offer services to help workers claim their tax refunds, it’s important to be cautious. These services often charge fees for tasks that individuals can handle themselves at no cost.

Consumer rights expert Martyn James warns that these companies don’t have any special access to HMRC’s system and simply follow the same procedures that anyone can use for free.

Instead of paying these third-party services, individuals should use the HMRC online portal to check their tax records and claim refunds directly.

Steps to Take to Claim Your Refund

To avoid overpaying taxes and to claim your refund, follow these steps:

1. Review Your Payslips and Tax Code: Ensure your tax code is correct and check your payslips regularly to make sure you’re not paying more than you should.
2. Claim Unused Tax Reliefs: Make sure you’re claiming all the tax reliefs you’re entitled to, such as for work-related expenses or pension contributions.
3. Use the HMRC Portal: If you suspect an overpayment, use HMRC’s online portal to check your tax records and request a refund.
4. Avoid Third-Party Refund Services: Instead of paying for tax refund services, use HMRC’s free resources to handle your tax matters.

Conclusion

Overpaying taxes is a common issue in the UK, but it’s important to understand how to identify and rectify it.

By reviewing your tax records, using the HMRC portal, and avoiding unnecessary third-party services, you can ensure that you get the refund you’re entitled to.

Stay proactive, and don’t wait for HMRC to notify you—take charge of your tax situation today.

This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.