Taxpaying citizens may erroneously overpay their taxes if they have not updated their information with HMRC or have been assigned an emergency tax code on a temporary basis. Through this blog post, we will discuss in detail how a tax refund can be claimed by using a P60 form. Additionally, we will also discuss ways to reclaim overpaid taxes on pension as well as explore important details regarding income tax in the UK.

What Is An Example Of A P60 Tax Refund?

To claim a tax refund using the P60 form, claimants will need to share the following details with HMRC:

  • their earnings in total
  • the amount of income tax that they have paid
  • the amount of income tax that they have paid in excess

Additionally, they must also provide details of their 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)

What Should I Do To Reclaim Overpaid Taxes On Pension?

To reclaim overpaid taxes while withdrawing funds from their pension, you can use the P55 introduced by HM Revenue and Customs for the tax year 2021-22. 

This form is only to be used if claimants:

  • do not have a P45
  • are not employed to work
  • are not claiming benefits

To access the P55 form online, claimants can use their Government Gateway user ID and password. If they don’t have one, they can register for the same.

The P55 form can be filled out online or by taking a printout and should be submitted to the HMRC by overtaxed individuals who fulfil the following conditions regarding a withdrawal from their pension pot: 

  • they have withdrawn a part of their pension
  • they will not be making regular withdrawals
  • their pension body has not made a refund

As a basic taxpayer, you would have been taxed at 40 per cent for making withdrawals from your pension. By filling in the P55, you are making a repayment claim to the HMRC to be repaid the excess tax deduction. If you fail to do so, you will have to wait until the end of the tax year for HMRC to pay back this amount. 

How Much Tax Will You Pay On A Second Job?

The tax that you pay on a second job will depend on a number of factors. However, generally speaking, your second job is usually assigned a BR (Basic Rate) tax code which indicates that there is a 20 per cent tax due on your income.  

Your second job is usually considered to be the one that provides a lower income than the first one and there is no consideration for Personal Allowance since it has already been accounted for. The reason is that the HMRC divides your total income by sources to calculate the amount of tax that is due on your cumulative income.

If someone works two jobs and their cumulative income is less than the Personal Allowance amount of £12,750, they can have it spilt across both incomes. Sometimes a second job may increase your tax bracket which leads to a higher tax deduction on your income with an insignificant impact on your take-home salary.

How Can I Avoid Tax Errors Due To Second Job?

To avoid being overtaxed or undertaxed (with tax arrears due at the end of the term) due to a second job, it is advisable to follow the below instructions: 

  • When you start a second job you must make sure that you get a Starter Form or P46 from your new employer. This form is used to update your employment details at the HMRC.
  • Confirm the tax codes assigned to both of your jobs. Your main job is usually assigned a 125L tax code for 2021-2022; while your second job will be assigned a BR, D0 or D1 tax code.

If your second job involves you in a self-employed position, you will have to pay your own tax and National Insurance contributions by filing a self-assessment tax return on the 31st of January every year. 

How Are Tax Codes Calculated?

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 or pension provider the amount of tax-free income that you are eligible for in that tax year. 

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.

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.

How Much Income Tax Do I Have To Pay?

Incomes above the minimum cap are taxed at an incremental rate of 20 per cent to 45 per cent depending on whether an individual belongs to the basic, higher or additional tax rate band. Below are details of these bands:

  • 0 per cent income tax when income is up to £12,570
  • 20 per cent income tax when income is between £12,571 and £50,270 
  • 40 per cent income tax when income is between £50,271 and £150,000 
  • 45 per cent income tax when income is above £150,001

If you are self-employed, you are required to file a self-employed tax return to pay your taxes through a self-assessment. 

Which Incomes Are Tax-Free?

Incomes derived from any of the following sources are considered to be tax-free in the UK:

  • Transport costs of an employee’s (and their immediate family) relocation for work in the UK
  • Winnings from games, pool betting, lotteries or competitions with prizes
  • Long service employee awards (certain limitations apply)
  • Individual savings account amounting to £20,000
  • Incomes such as interest or dividends arising from savings accounts 
  • Pensions paid to war widows and dependents
  • Social security and state benefits include maternity allowance, employment and support allowance, attendance allowance, child tax credit and housing benefit. 

Conclusion:

In order to reclaim overpaid taxes, employees can use a P60 form by declaring details of their earnings, paid amount of income tax as well as the amount that they believe to have overpaid. Claimants may have to wait until the end of a tax year, however, claims as far back as four years can be reclaimed by providing required details through a P60 form. Similarly, if someone has overpaid their tax on pensions, the excess amount can be reclaimed by contacting the HMRC as well. 

FAQs: What Is An Example Of A P60 Tax Refund?

How do I claim tax back on my P60?

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

How do I read a P60?

A P60 is a statement of your income and paid taxes. It requires information regarding the total amount of your income, tax deduction and NIC contribution for the year. It also shows your previous salary from earlier employment, the total amount of previously deducted taxes, statutory payments received by you, your final tax code and details of your student loan deductions (if any).

Do you need P60 for a tax rebate?

Yes, you need a P60 to reclaim overpaid taxes. While your employer provides this form to you at the start of the tax year in April, overpaid taxes can be reclaimed at the end of the year.

Can you claim tax back if you are PAYE?

Yes, you can tax back if you are PAYE. This may have happened due to 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.

Do HMRC automatically refund overpaid tax?

Yes, HMRC refunds overpaid taxes automatically. It can take anywhere between a few days to a few weeks; depending on the nature of the situation that lead to the overpayment and if they require additional evidence from the claimant.

References:

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

What Is A P60?.

P45, P60 and P11D forms: workers’ guide

Claim back a flexibly accessed pension overpayment – GOV.UK

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

Tax-free bonus to employees in the UK – What you need to know

Income tax calculator 2022-23, 2021-22 and 2020-21

How much tax do you pay on a second job? – The PAYE People

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John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.