If you have an employed income and pay tax through the Pay-As-You-Earn (PAYE) system, you may sometimes overpay or underpay.

HM Revenue & Customs (HMRC) does a PAYE record review at the end of each fiscal year in April, which shows whether you have paid too much or too little tax automatically by HMRC.

When you are due for a tax refund, HMRC will send you a letter called P800, but these letters don’t always bring an unexpected windfall – they are issued even if you haven’t paid enough tax.

Continue reading

The letter will tell you if you can apply for a refund online through the UK government website. However, you will only receive a P800 after the tax year ends and usually before the end of September.

You may have paid too much tax if:

  • You started a new job and had an emergency tax number for a while

  • Your employer used the wrong tax code

  • You were only employed for part of the tax year – especially if you were dismissed

  • You had more than one job at the same time

  • You are a student and only worked during the holidays

  • other income that the HMRC tax has reduced through your tax number

  • You stopped working and had no taxable income or benefits for the remainder of the tax year

  • Your circumstances have changed – for example, you switched from full-time to part-time employment or you stopped working

You can also use the UK Government’s Income Tax Calculator to check for overpayments yourself online to help calculate how much you might be owed.

If you can get a P800 from HMRC and apply online, the money will be in your bank account in about five business days. If you choose to refund by check, you will have to wait 45 days for payment.

Just watch out for fraudulent emails letting you know that a tax refund or refund is due.

Before accepting a refund amount, make sure the refund is correct because:

  • The P800 calculation is only an estimate made by the HMRC systems. Therefore, the calculation is only as good as the data it contains

  • HMRC may have done something wrong, so the repayment may be too high or not enough

If HMRC repays you too much and you don’t tell them, they could fine you if they think you negligently failed to notice the overpayment. You would also have to return the excess amount paid to you.

If you are due a refund of less than £ 10, HMRC will only refund you if you submit an application – their systems will not automatically issue it.

What is a P800 Tax Calculation?

P800 letters are typically sent between June and October after the tax year ends.

The Low Income Tax Reform Group website states: “Your employer will tell HMRC how much income you have received and how much tax you have paid throughout the tax year.

“Banks and building societies also notify HMRC of the interest they have paid you on accounts held in your name.”

Using this information, HMRC then carries out an automatic reconciliation at the end of each tax year. This means that they compile all the information received to find out whether or not you paid the correct amount of tax.

This is how you can claim you paid too much tax

The tax year ended April 5, 2021, contact HMRC and let them know why you think you paid too much. You have four years to claim a refund from the end of the tax year in which the overpayment occurred.

You can find all the details on the UK.Gov website here or contact them by phone on 0300 200 3300.

What to do if you haven’t paid enough taxes

Those who have paid too little will be notified between June and October.

This is usually the case if you have more than one source of income, have changed jobs, or are receiving taxable fringe benefits such as health insurance.

HMRC must inform you of the underpayment error within 12 months. If not, you can ask them to stop the additional tax claim.

If you are unable to pay the amount due for more than a year, you can request that the repayment be split over several tax years.

Find out more about tax overpayments and underpayments on the GOV.UK website here.

Get the latest news on money savings and benefits delivered straight to your inbox. Sign up for our weekly money newsletterhere.