Taxpayers can end up overpaying taxes if they were put on an emergency tax code due to starting a new job, had two jobs simultaneously, or switched from a full time to a part-time job. Through this blog post, we will analyses whether you can get a tax refund and the process to go about it. Additionally, we will also discuss some important forms related to a tax refund, calculation of tax codes and the role of emergency tax codes with regards to overpaid taxes.

Can I Get Tax Refund Through Wages?

Yes, if you have overpaid your tax paid through wages under the PAYE scheme, you can get a tax refund by contacting the HMRC. 

At the end of a tax year, HMRC sends all taxpayers a P800 form which outlines details of their incomes and tax deductions for the entire tax term. Sometimes, you will find through the P800 that you are due for a fund. If this is the case, you will also be told whether you will be repaid the amount through an online bank transfer or a cheque sent through the post.

If not, you can reconcile with your bank statements and books of accounts to make sure that the document does not carry incorrect data and then contact the HMRC. To calculate your taxes and income accurately before contacting the HMRC, you will need the following:

  • your form P60 and/or P45 from your employer(s) or pension provider(s)
  • your form P11D from your employer, if you receive taxable benefits-in-kind
  • details of taxable state benefits that you have received
  • bank statements and  Building society statements 
  • dividend certificates
  • details of rental income and expenses

When you call HMRC about your tax refund due to overpayment, you must make sure that you have the following information available with you:

  • your personal details: including  your full name, address and date of birth
  • your National Insurance number
  • details of your employers or pension providers and their PAYE scheme reference number
  • Detailed estimates of your earnings and/or pensions from each source for the current tax year (with documentation)

The reason(s) why salaried individuals may overpay their taxes through a PAYE scheme may be classified as follows:

  • They started a new job and were assigned an emergency tax code on a temporary basis
  • Their employer used an incorrect tax code
  • They held a job for a part of the year (and not the entire tax term)
  • They had more than one job at the same time
  • They are a student who only worked during holidays
  • Their “other incomes” have been reduced
  • They stopped working in the middle of the year and had no taxable income or benefits
  • Their circumstances changed; such as moving from full time to part-time work

In the case that a taxpayer has overpaid their tax due to any of the following reasons, 

  • being put on an emergency tax code due to starting a new job,
  • having two jobs simultaneously, or
  • switching from a full time to a part-time job

they can claim a tax refund and reclaim the amount from HMRC after the end of the tax year. Claims for overpaid taxes can be made up to four years. This means that an overpaid tax in 2022 can be claimed until 2026.

Tax refunds are usually paid by HMRC within 5 working days directly to the claimant’s UK account. If you do not claim it within three weeks, HMRC will send you a cheque through the post.

How Can I Claim A Tax Refund?

To claim a tax refund, you will need to use the P60 form and share the following details with HMRC:

  • your earnings in total
  • the amount of income tax that you have paid
  • the amount of income tax that you have paid in excess

Additionally, you must also provide details of your National Insurance number and employer reference number.

In the case that a taxpayer has overpaid their tax due to any of the following reasons, 

  • being put on an emergency tax code due to starting a new job,
  • having two jobs simultaneously, or
  • switching from a full time to a part-time job

they can reclaim the amount from HMRC after the end of the tax year. Claims for overpaid taxes can be made up to four years. This means that an overpaid tax in 2022 can be claimed until 2026.

You will also need your P60 form in the following situations:

  • to reclaim overpaid tax
  • to apply for tax credits
  • to serve as proof of income (if someone applies for a loan or a mortgage)

What Does A P60 Form Show?

A P60 form serves as a statement that shows details of a taxpayer’s income and paid taxes. It includes the following information:

  • The total amount of your income
  • The total amount of your tax deduction 
  • Your NIC contribution for the year
  • Your previous salary from an earlier employment
  • The total amount of previously deducted taxes
  • Statutory payments received by you (these may include maternity and paternity pay)
  • Your final tax code
  • Details of your student loan deductions (if any)

How Are Tax Identification Numbers Used In The UK?

Tax identification numbers are used to track and monitor the tax accounts of individuals. Although the term TIN Number is not specifically used in the UK in its strictest sense, the HMRC issues two TIN-like numbers to members of the public. The purpose and use of these are described below:

  • The Unique Tax Payer Reference (UTR): This is a ten-digit set of numbers issued by the HMRC to individuals and businesses who qualify for paying tax returns in the UK. You will find this number on the front page of the tax return (form SA100 or CT600). In addition to this, you will find it on a “Notice to complete Tax Return” (form SA316 or CT603) or a Statement of Account. It is also printed next to the headings of “Tax Reference”, “UTR” or “Official Use”; but the appearance and terms that are used will depend on the type of document issued. 
  • The National Insurance Number (NINO): This includes two letters which are followed by six numbers and then only one of the letters between A, B, C and D. Individuals residing in the UK will be issued a NINO once they are 16 years of age. They will be informed by the Department for Work and Pensions (DWP) or the HMRC. If you are an employee, you will find this number on your payslip as well as on a Statement of Account issued by HMRC. It links individuals to their records of national insurance contributions, tax payments, student loans as well as social security benefits.

What Is An Emergency Tax Code?

An emergency tax code or a non-cumulative tax code is one that only takes into account the period in question for your tax calculation and deduction. This means that depending on whether you receive your pay on a weekly or monthly basis, a non-cumulative, temporary tax code will apply for that specific period only and it may change the next time you receive a payslip. In the case of weekly pay, you will find a W1 extension at the end of your tax code; while for a monthly salary your tax code will end with an M1 extension.

This means that the income tax rate is applied to the entire sum of income(s) of an individual without the deduction of Personal Allowance from their earnings. In case an individual has paid a sum of income tax before a non-cumulative tax code is applied to their income, the amount cannot be adjusted. Therefore, there are chances that taxpayers will end up overpaying their taxes when a non-cumulative tax code is assigned to them in the middle of a tax term.

However, this overpaid amount is recoverable by contacting the HMRC and updating your employment information with them.

What Are Tax Codes?

Tax codes are a combination of letters and numbers that determine the amount of income tax due on an individual. While the letters indicate your financial position and how it relates to your personal allowance, the numbers tell your employer pr pension provider the amount of tax-free income that you are eligible for in that tax year. 

For instance, 1257L (currently the most common 2021-22 tax code in the UK) refers to the new Personal Allowance rate for 2021-22, which is £12,570 and the letter “L” indicates that the individual is entitled to this amount of tax-free income. Any taxes that are to be charged will be above additional amounts beyond this figure.

How Are Tax Codes Assigned?

The following steps are followed by the authorities while assigning tax codes:

  • Step 1: Your tax allowances are calculated. In most cases, this is an individual’s personal allowance added to any other allowances and job expenses.
  • Step 2: Your deductions are calculated. These are incomes for which tax has not been paid and may include any part-time work or certain state benefits.
  • Step 3: The deductions are subtracted from the tax allowances. The result is your pre-tax income. If this amount equals personal allowance, your income remains tax-free.

Conclusion:

From the discussion above, we have come to learn that not only can you apply for a refund on overpaid tax, you can also expect to be refunded before the end of the tax term. Overpayment of taxes can be due to a lot of reasons. The first point of reconciliation of incomes and taxes is the P800 form. If the overpaid taxes are calculated at this stage the HMRC will immediately inform you of the mount and the mode of payment. In the other case, claimants can file for overpaid taxes by sharing relevant information and evidence while they request a refund. 

FAQs: Can I Get Tax Refund Through Wages?

How do I claim tax back on salary?

To claim a tax refund, you will need to use the P60 form and share details of your earnings, the amount of income tax that you have paid and the amount that you have paid in excess with HMRC. Additionally, you must also provide details of your National Insurance number and employer reference number.

Can you get a tax rebate on PAYE?

Yes, you can get a tax rebate on PAYE for up to the past four years.

Do HMRC automatically refund overpaid tax?

HMRC refunds overpaid tax; it may be done automatically at times, while you may need to apply for it at certain times.

How long does it take to get a tax refund?

Tax refunds are usually paid by HMRC within 5 working days directly to the claimant’s UK account. If you do not claim it within three weeks, HMRC will send you cheque through the post.

Can I get a tax refund if I didn’t work?

Unless you are being paid a tax refund from a previous tax term, you cannot get a tax refund if you didn’t work or paid any taxes.

References:

How do I claim back tax I have overpaid through PAYE on wages or pensions? | Low Incomes Tax Reform Group

Claim a tax refund – GOV.UK

P60 tax refund examples – what do you need to know?

Claim back a flexibly accessed pension overpayment – GOV.UK

Estimate your Income Tax for the current year – GOV.UK

What if I pay too much tax?

Cumulative and Non-Cumulative Tax Basis – PayFit

Emergency tax codes – Which?

What your tax code means – GOV.UK

Tax codes – GOV.UK

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