It's unavoidable that you'll owe the IRS money in some form or another, but hearing that you might be eligible for a tax refund is always good news! When you receive unexpected communications claiming a tax rebate, be cautious because these could be false tax scam attempts. If you have cause to believe you are due a tax refund, you should learn if you'll need to file a claim and how to do so, as well as when you may expect to get the refund and how far back you can go when filing a tax refund claim.
What causes an overpayment of tax?
There are a number of reasons why you may have been paying too much tax, but the most common include an inaccurate tax code for your PAYE income or a change in your income in the middle of a tax year, an improper tax code for your pension income, or a mistake on your self-assessment tax return.
If you overpaid tax on your PAYE income, you may be eligible for a refund if:
- When you first started working for your new employer, they didn't have all of the information they needed to add you to their payroll, so they utilised an emergency tax code.
- Your boss made a blunder and utilised the incorrect tax code.
- You were only working for a portion of a tax year or switched from full-time to part-time employment.
- You worked multiple jobs at the same time.
- You have other sources of income on which HMRC levies a tax based on your tax code, but this income has decreased.
If you receive a pension, you may have overpaid taxes if:
- The tax code used by your pension provider was incorrect.
- The amount of your state pension is not aligned with the relevant tax code.
- You have multiple sources of PAYE income, such as multiple pensions.
- You overtaxed a lump-sum pension payment.
If you filed your own self-assessment tax return, you may have committed typical errors that resulted in an overpayment of tax, such as:
- Not claiming all of your allowable expenditures
- Forgetting to incorporate contributions to a private pension programme
- Including earnings from the inappropriate time period, such as whole of April.
- You haven't declared any gift aid donations you've made this year.
- You could also overpay tax if you make payments on account but your income (and thus tax liability) is lower than the prior year.
How can I know if I've paid too much tax?
If your primary source of income is taxed at source, the only way to see if you've overpaid tax is to look at your tax code. This information can be seen on your pay stub. It's critical that you understand your payslip since it contains crucial information about the deductions made from your paycheck before it's handed to you. It could thus be acceptable deductions, such as paying down a school debt, rather than paying too much in taxes!
What exactly is a P800?
HMRC generates a P800 tax estimate and sends it to you if they believe you have either overpaid or underpaid tax. The data for the computation is gathered from a variety of sources and then automatically reconciled. Your employer, pension provider, bank, or building society are all required to report on your finances to HMRC on a regular basis. These places will tell you how much money has been sent to you, how much interest has been paid into your accounts, and how much tax has been withheld.
What should you do if you get a P800?
P800s are typically mailed at the end of the fiscal year (5th April), although you may not receive one until September or October. A P800 is not sent to everyone, and it is only sent to persons that HMRC believes have overpaid or underpaid tax. If you receive a P800 stating that you are due a refund, you must carefully review HMRC's calculations. Because the calculation is based on the information HMRC receives, it is merely an estimate. As a result, it may not include all essential information about your tax situation for any given tax year, such as whether you made any dispositions. If you do not notify HMRC and receive the refund, you may be required to repay any funds received as well as incur a penalty.
If you are entitled a refund, the P800 will tell you if you can claim it online via an online bank transfer through your Personal Tax Account. If you are unable to claim your refund online, HMRC will mail you a check, which may take up to 60 days to arrive. If you are able to claim online but do not do so, HMRC will still offer you a refund, but it will be issued via check and will take much longer to arrive.
