The taxman is very good at his job, which is helping himself to a share of the money you earn from working, investing and saving.
He is thorough and will take every penny he is owed.
But believe it or not, he is only human. Sometimes he makes mistakes and takes too much.
At Continuum we are looking at how to check your tax bill, and how to get a payout from the taxman if he has taken too much.
What goes wrong?
The tax system is complex, and mistakes can creep in, but to be fair, the tax system may eventually spot when an error was made.
If you are owed a tax refund you will usually hear from HMRC without having to do anything. The taxman will calculate that you have paid too much tax and send a P800 letter by the end of November for the next tax year. So, for the current, 2024/25 tax year you’ll have to wait until 30 November 2025 before the tax system will return your money.
But there’s no need to wait. You can also apply for a tax refund.
What goes wrong with your tax?
The most common reason for a tax rebate is that you have paid too much income tax. If you earn more than the £12,570 personal tax-free allowance, you will have income tax to pay, and PAYE means most people’s income tax is calculated for them, but things go wrong because it’s not just income from employment that counts as personal income.
Everything from pension payments, income from life annuities and even interest on investments is considered ‘earned income’, making it possible to get an incorrect tax code.
You can check your tax at the government portal – gov.uk. You’ll need to create a user ID if you don’t already have one and then be able to access your tax information and track your refund progress online.
Understanding your tax code
Your tax code is an alphanumeric series shown on your payslip. It is based on your Personal Allowance, the amount you can earn before paying tax. If your tax code is 1257L, you have a Personal Allowance of £12,570 for the year.
The letters provide additional information:
- L: Basic tax-free allowance.
- M/N: Marriage Allowance. M means you receive a portion of your spouse’s allowance, and N means you’ve transferred part of yours.
- K: You have income not taxed at source that exceeds your allowance.
- BR: All income taxed at the basic rate (usually used for second jobs).
- D0/D1: All income is taxed at the higher or additional rate.
HMRC may adjust your code if you have other sources of income, taxable benefits, or owe tax from previous years.
Claiming expenses and allowances
You may also be eligible for refunds depending on your employment status from certain travel and accommodation costs to professional membership subscriptions. You need to be sure you are taking full advantages of any tax allowances which might be available, but you may need to chase these refunds yourself.
Making a claim
You can claim back for overpayments going back up to four years and update your tax code for the current year if something has changed.
If you have received a P800 letting you know you are due a tax refund, you can claim just by going online. If you haven’t received a P800, you’ll need to contact HMRC directly through the online portal or by giving them a call.
Getting a tax expert on your side
The tax system is complicated, and a tax expert can help you through the maze of rules and regulations. There may be reliefs and allowances that you could claim, as well as errors by the taxman.
If you think that you may be paying too much tax and want to see how you could potentially be paying rather less. Simply call us at Continuum for the help you need.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to any taxation strategy, you should seek independent financial advice before embarking on any course of action
The Financial Conduct Authority does not regulate taxation advice.
Levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change
