PAYE Tax Refunds: A Complete Guide
If you are employed or receiving a pension in the UK, your income is usually taxed through the Pay as You Earn (PAYE) system. While this is designed to collect the right amount of tax throughout the year, it is not uncommon to pay too much.
In many cases, overpayments happen simply because of how PAYE operates, and no one is at fault. If this happens, you may be entitled to a tax refund.
Common Reasons for PAYE Tax Refunds
You may have paid too much tax if:
- You worked for part of a tax year and were placed on an emergency tax code.
- You had multiple PAYE jobs or pensions at the same time.
- You worked casually or as a student during holiday periods.
- Your employer or pension provider used the wrong tax code.
- Other taxable income reduced your tax code.
- Your circumstances changed (e.g. switching from full-time to part-time work or stopping work mid-year).
- Your state pension was calculated incorrectly in your code.
- You paid too much tax on a pension lump sum.
In many of these situations, you may only have received part of your tax-free personal allowance when you were entitled to the full amount.
HMRC’s Automatic Reconciliation Process
At the end of each tax year, HMRC may review your income and tax records and issue a P800 tax calculation. This shows whether you have underpaid or overpaid tax.
Until May 2024, many repayments were sent automatically. Now, if your P800 shows a refund is due, you usually need to claim it.
P800 tax calculations are typically issued in the summer after the tax year ends. If you don’t want to wait or don’t receive a P800, you can contact HMRC directly to request a refund.
Understanding Your P800 Tax Calculation
There are two main types of P800 outcomes:
1. P800 Allows Online Claim
If your P800 says you can claim online, you must act to receive your refund. It will remain on your tax record until you claim it. Options include:
- Online bank transfer (via your Personal Tax Account or the HMRC app)
- Requesting a cheque by contacting HMRC
Online bank transfer refunds are usually received within five working days, while cheques can take up to six weeks.
2. P800 Refund Issued by Cheque
In some cases (e.g. multiple years involved), HMRC will automatically issue a cheque. You do not need to take action, but it’s important to ensure your address is up to date.
Why You Must Check Your P800 Carefully
The P800 is only as accurate as HMRC’s records. Mistakes can happen, which may lead to over- or under-payments. Always check that the figures are correct.
If HMRC repays you too much and you do not report it, you may face penalties.
Tip: Compare your P800 against your P60, payslips, and any pension statements to ensure everything matches.
Small and Earlier-Year Repayments
- Refunds under £10 will only be paid if you submit a claim.
- For earlier years, you may still be entitled to a refund (or in some cases, HMRC may find you owe tax). Time limits apply, so do not delay.
Claiming in the Current Tax Year
If you think you’re overpaying tax in the current year, it is often due to an incorrect tax code.
You should:
- Log into your Personal Tax Account on GOV.UK, or
- Contact HMRC by phone (0300 200 3300) or web chat.
Be prepared with your:
- National Insurance number and personal details
- Employer or pension PAYE reference
- Estimated income for the year
HMRC may issue a new tax code and adjust your payroll, refunding tax through your wages or pension.
Claiming After the End of the Tax Year
If the tax year has ended and you’ve overpaid, but you have not received a P800, you can write to HMRC. Include:
- Full personal details
- Employment/pension information
- PAYE references, P60s, or P45s
- Your repayment request and preferred payment method
Keep copies of all correspondence. In some cases, HMRC may ask you to complete form R38.
Emergency Tax and Overpayments
If you start a new job without a P45, you may be placed on an emergency tax code, which often leads to overpayments. Once HMRC confirm your correct code, adjustments are made through payroll.
If this doesn’t happen before the end of the year, any overpayment should be refunded via the P800 process. However, if you also have other untaxed income (such as rental income or dividends), the refund may be processed through your Self-Assessment tax return, as HMRC will reconcile all income and tax paid together
Work Changes and Refunds
Different work changes can affect PAYE refunds:
- Stopped and restarted work: You may receive unused allowances through payroll.
- Stopped work with no further income: Use form P50 to claim a refund in-year.
- Unemployed and claiming benefits: Refunds are adjusted after Jobseeker’s Allowance or ESA ends.
- Leaving the UK permanently: Complete form P85 to claim back unused allowances.
Lost Documents (P60s and P45s)
You’ll need these forms to claim a refund:
- Employers must issue P60s by 31 May each year.
- Employers must issue a P45 when you leave a job.
If lost:
- Ask your employer for a duplicate P60 or statement of earnings.
- Contact HMRC for official pay and tax records.
Key Takeaways on PAYE Tax Refunds
- Overpayments are common and often occur automatically through PAYE.
- Always check your P800 calculation carefully.
- Refunds must often be claimed, especially from May 2024 onwards.
- Different forms apply depending on your circumstances (P50, P85, R38).
- Time limits apply for claims, don’t delay.
If you’re unsure whether you are due a refund, or want expert assistance with PAYE tax issues, Accounting People can help ensure you receive any repayments you’re entitled to and avoid common mistakes.
