By Alan Gregory | May 19, 2021 | 8 minutes of reading
It’s payday. You look at your pay slip, but something doesn’t seem right.
You ask yourself: “Did I pay too much tax?”
The same thing may have happened when your self-assessment calculation arrived from HMRC.
It’s quite possible that, for one reason or another, you paid too much at some point in the past.
This could include, among others, income tax, corporation tax or capital gains tax.
Below we’ll look at the most common types of tax people pay in the UK and help you understand if you can get tax back, when you need to claim it back and how to claim tax back if you have to .
How do you know if you’ve paid too much tax?
Before we look at how you can claim back taxes, it’s important that you know whether you’ve actually paid too much tax.
What do you need to do?
Well, for starters, you can use the services on the Government website. These let you know if you have paid too much tax and help you check your income tax payments and exercise how much income tax you should pay.
For example, you may have compared your tax code to your personal allowance and thought it was wrong. If this is the case, you should contact HMRC directly to confirm. Alternatively, you might be interested in reading our recently published guide to how to change your tax code for further reading.
You may also be able to speak to your payroll department, if you are employed, to ask for their assistance. You may need to provide P60 if you think you have overpaid tax in previous years.
Can you claim a tax reduction?
Yes, if you overpaid taxes, you can get them back. Provided you claim in time. You may need to complete an R38 form. If you need to complete an R38 form, make sure it is correct to avoid delays in your application. The form includes 11 questions related to your salary, financial and personal information. You can even designate other people as reimbursement recipients.
The government website has a online verification servicewhich you can use here to see if you can claim your refund.
How long do I have to request a tax refund?
Wondering if there is a deadline to claim?
In terms of the self-assessment refund, you have four years to submit a claim for a tax refund or reduction. If yours needs to be corrected, the government website has more information on Self-assessment corrections.
If you are in a situation where you need to correct an error in your self-assessment tax return or request a refund (within 12 months), you can do so by completing an amendment via a letter to HMRC or via the website.
How to recover personal income tax
There is a form called R38 that you must complete if you have paid too much tax and want to claim the overpayment. You can also use this form to authorize a representative to collect the tax payment on your behalf. The government website has more details on claim tax refunds.
PAYE tax recovery
What is PAYE? If you’re not familiar with it, it’s the acronym for Pay As You Earn, which deducts tax from your salary before it’s paid into your account. This is possible if your salary changes during a tax year
you might end up paying the wrong amount. This could be because you were not employed for the full 12 months of the financial year. You can get an estimate of whether you paid too much tax this year with the HMRC Tax Check Tool Or this tool for previous tax years.
Recovery of self-assessment tax
HMRC uses a system called Self evaluationto collect income tax. This is often aimed at self-employed workers, but also at anyone who has received additional income, in one form or another, which is not declared to the tax authorities.
Can you retrieve the self-assessment? Yes and it’s completely free. A self-assessment tax return shows how much you earned and how you got that extra money in a tax year. Forms must be submitted and invoices paid by February each year.
For those who paid too much tax, you can request the refund via your tax return. HMRC will arrange your refund once they have processed your return.
Then you simply tell HMRC whether you want it paid by check, into your account, or deducted from the next tax liability.
Reclaiming Capital Gains Tax (CGT)
Do you think you paid too much CGT?
There is a cure here too. You can apply for what is called ‘overpayment relief’. You must make the request within four years of the end of the relevant tax year, telling HMRC in writing why you consider the overpayment or excessive contribution has occurred.
However, according to Tax Aid, there is “strict conditions regarding overpayment relief and it may not be available in all circumstances“. The charity also warns that “you will normally need professional advice to make a claim for overpayment relief”.
It is therefore best to speak to a qualified accountant to help you deal with such a claim. Check out our simple guide for more information on Capital gains tax.
Recover pension tax
Can we recover tax on pensions? Yes, you can claim a pension tax refund on a small lump sum of pension you received. How do you proceed?
The best option is to use HMRC’s online service (Government Gateway user ID and password required) or to print the relevant form and send it to them.
As with retreats in general, there are subtleties to be aware of. Anyone receiving lump sums for serious illness must use form P53Z to recover, within the year, any tax overpaid on these lump sums. The same form can be used if you have flexibly access your pension and I emptied your pot. Alternatively, for those who are only using part of their pension pot, or if you are not working or receiving benefits, you should use form P55 or form P50Z.
For the full list of forms and details regarding pension tax recovery go to this HMRC webpage.
How to claim overpayment of corporation tax
Maybe you run a business and discovered it was paying too much Corporation tax Last year? It is possible to recover it. In fact, you can even get interest at the rate of 0.5% from HMRC if you qualify for a claim.
How do you do? You must notify HMRC via your business tax return.
When will you receive interest? First, if you paid your taxes early (called “refund interest”) and second, if you paid more than your business owes (called “refund interest”). One thing to note: interest is taxable and you will need to include it as income on your corporate tax return.
Income tax recovery
You may be able, if you are working, self-employed or paying via PAYE, to get a tax refund (rebate) if they have paid too much income tax. In fact, you may have paid too much for one of the following and you will be able to claim a refund:
• pay for your current or previous job
• pension payments
• income from a life annuity or pension
• severance pay
• a self-assessment tax return
• savings or PPI interest
• foreign income
• UK income if you live abroad
• fuel costs or work clothes for your job
Recover National Insurance
Another aspect of the tax you pay is National Insurance. It may happen that you pay too much, but it is also possible to make a claim for this.
When could this happen? Scenarios include paying NI after reaching state pension age or after working in multiple jobs. There is an online government tool for request a refund of your national insurance contributions.
Recover VAT
Often you can reclaim VAT paid on goods and services purchased for use in your business, but not to some extent for personal reasons. For example,if half of your phone calls are private, you can reclaim 50% VAT on the purchase price and service plan.
Since 2019, most organizations must follow Making Tax Digital’s VAT rules, meaning they must keep digital records and use tax software to submit their returns.
How to claim tax relief for working from home
Many of us have had to convert our homes into offices during the pandemic. As the pandemic accelerates the shift to remote working, tax breaks are becoming increasingly relevant here too.
Indeed, if you have had additional costs linked to working from home, you can benefit from tax relief. But not if you choose to work from home. Items you could claim include:
• gas and electricity
• measured water
• business phone calls, including dial-up Internet access
It is important to note when claim tax relief for working from homeyou must claim only the part that relates to your work.
Conclusion
Various circumstances may require you to request a tax refund. This could be because you overpaid on your self-assessment or because your PAYE tax code was found to be incorrect for the year.
In each case, there are ways to submit your refund claim to HMRC, with a number of online tools available on the government website to make it quicker and easier. Please refer to the information above again for more details on the tax refund that applies to you.
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