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Money, tax and benefits

Money, tax and benefits

Have you paid too much tax through PAYE?

PAYE (Pay As You Earn) is the system used by employers and pension providers to deduct tax from your wages or pension. If you think you've paid too much Income Tax through PAYE you can take some simple steps to get a repayment.

When might you have overpaid tax through PAYE?

HM Revenue & Customs (HMRC) gives you a tax code that shows your employer or pension provider how much tax to deduct from your wages or pension before you get paid. You'll find your tax code on your P2 Notice of Coding (normally sent to you at the start of each tax year), your P45, or your wages/pension payslip.

You may have paid too much tax if:

  • you started a new job and had an emergency tax code for a while
  • your employer was using the wrong tax code
  • you were only employed for part of the year
  • you're a student who only worked at holiday times and didn't complete form P38S
  • you had more than one job at the same time
  • you had other income (normally taxed through your PAYE code) reduced, for example where we have attempted to collect the tax due on savings or rental income via your PAYE code but the amount that has been included in the code is too high
  • you stopped working and didn't get any taxable earnings or benefits for the rest of the year
  • your circumstances changed - for example you retired, were made redundant or became self-employed
  • you have taken a pension in the form of a lump sum rather than a small monthly amount (this is known as 'trivial commutation'), the rate of tax you pay on the lump sum could be higher than the basic rate of tax you pay over the year and could cause an overpayment

If you think you've paid too much tax this year

How you reclaim this year's tax will depend on your circumstances.

If you're employed

Tell your employer's tax office why you think you've paid too much tax through PAYE. They may already have everything they need to check your claim. If not, they'll tell you what documents to send. You may get a new tax code, so any refund will be included with your wages.

Jobseeker's Allowance or taxable Incapacity Benefit

If you're claiming Jobseeker's Allowance or taxable Incapacity Benefit:

  • take Part 2 and Part 3 of your P45 to your local Jobcentre Plus 
  • keep Part 1A as a record of your income

If you claim Jobseeker's Allowance, your Jobcentre Plus will pay the refund after 5 April or when you stop claiming (whichever's earlier). If you get Incapacity Benefit, you'll get any refund from your tax office after 5 April.

If you're unemployed but not claiming Jobseeker's Allowance or taxable Incapacity Benefit

If you're back at work within four weeks:

  • give Part 2 and Part 3 of your P45 to your new employer
  • keep Part 1A as a record of your income

Any refund due will be included with your wages.

If you've been unemployed for four weeks, or you've retired:

  • complete the relevant parts of form P50 'Claim for income tax repayment'
  • send it to your Tax Office with Part 2 and Part 3 of your P45
  • keep Part 1A as a record of your income

The tax office will send any refund due to you in the post, together with a new P45 if necessary.

 

If you’ve taken a pension in the form of a lump sum (trivial commutation)

You may choose to take your pension(s) as a lump sum rather than a small amount each month. This is referred to as a 'trivial commutation' and is only for small pensions (a few thousand pounds). The rate of tax you pay on the lump sum could be higher than the basic rate of tax you pay over the year.

If you want to apply you will need to:

  • ask you tax office for a form P53
  • complete the form with details of your estimated income for the year
  • send it to your tax office with Part 2 and Part 3 of your P45
  • keep Part 1A as a record of your income

The tax office will send any refund due to you in the post.

If you think you paid too much tax in previous years

You can write to your local tax office. Include any relevant documents about your earnings during the tax year for which you're claiming, such as:

  • payslips
  • P60, P45
  • information about your employment and benefit history

The tax office will look into your query, work out how much they owe you and send you a refund in the post or by bank transfer. You can claim back overpaid taxes for up to a maximum of six years previous to the current tax year.

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