Claiming Back Overpaid Tax

In theory it should never happen, but there are instances, and quite a number of them, when people do overpay their tax, even through a system like Pay as You Earn (PAYE), which was engineered to avoid this kind of situation.

The good news is that if you feel you've overpaid on your taxes this way, reclaiming the money is easy. There are companies that will do it for you - for a fee, of course - but you don't need them. The system is quite straightforward.

Why Might You Have Overpaid?

There are quite a few situations that can cause an overpayment of tax. If you started a new job and were given an emergency tax code, for instance, then you'll have overpaid until you received a permanent tax code.

If you only worked part of the year, you might well have paid too much, and the same applies if your employer used the wrong tax code for you (which does happen, sadly). Changing circumstances - retiring, or becoming self-employed or redundant - can mean an overpayment, as can stopping working and not receiving more income.

It can also happen if you have more than one job at a time, or you're getting other income which HMRC overtaxes via your PAYE. If you're a student who worked during the holidays but didn't fill out the proper form (P38S), then too much tax will have been withheld.

Finally, did you take a pension as a lump sum? If so, you might have been paying a higher rate of tax than was needful.

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How To Reclaim

The ways you can reclaim depend completely on your circumstances - whether you're working for an employer, unemployed or retired.

Where you have an employer, explain the suspected overpayment to their tax people and provide documentation if necessary. It's perfectly possible that you'll require a new tax code, which they can provide. In this instance, where you've overpaid, the refund will come in your wages.

With unemployed people, there are two categories. Those who are simply unemployed can complete a P50 form then send it to the Tax Office, including Parts 2 and 3 of the P45, and they'll receive a refund in the post. However, for those unemployed who are returning to work in four weeks should do everything through their new employer, handing them the appropriate parts of the P45. In this case any refund will come through the wages.

But those who are unemployed and getting Jobseeker's Allowance or a taxable Incapacity Benefit fall into a different category. They will need to go to the nearest Jobcentre Plus with Parts 2 and 3 of their P45. The refund will come through after April 5.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Pension

Where you're retired and have taken a pension as a lump sum and you believe the rate of tax has been too high, then you'll need to fill out a P53 form and also give details of your estimated income for the year, sending both to your tax office. Any refund due will be posted to you.

Paying Too Much In Previous Years

If you think you've overpaid in previous years, you can supply proper documentation and contact your tax office. However, you need to be aware that the time limit for making a claim is six years.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Unclaimed Money Tracer lets you tell us what might be out there and we will map out the exact UK services to search, in the right order, to track down unclaimed money. Try it now →