How to get a tax refund

With refunds from HMRC jumping by 6.6% last year, we explain how to check you’re paying the right amount of tax (and what to do if you’re owed money).

None of us likes paying tax and worryingly it seems that many Brits are handing over more of our hard-earned cash than we need to.

According to new research from RIFT Tax Refunds, the average tax rebate for 2023 was £1,562, which represents a 6.6% increase from the previous year.

As RIFT points out, you can backdate your refund for up to four years, with the average four-year claim standing at a little over £3,000.

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The most over-taxed jobs

Interestingly, the research also found that people employed in certain industries are more likely to be owed a refund.

According to the findings, construction, the military and security were among the most over-taxed sectors.

Here, we explain how you can ensure that the deductions from your salary are as they should be.

Check your P60

If you have tax deducted from your earnings or pension through the PAYE (pay as you earn) system, you should receive a P60 from your employer or pension company.

This document outlines your income and deductions for the tax year.

If you have more than one source of income, you should get a P60 from each employer or pension provider.

You should always check your P60s thoroughly to make sure your tax code, and any tax that has been deducted, is correct.

What should my tax code be?

If you’re under 65 and eligible for the basic tax-free Personal Allowance, your code should be 1257L.

This code is made up of the Personal Allowance divided by 10 followed by the letter L. So, the code is 1257l because the Personal Allowance is £12,570. 

However, other tax codes may apply depending on your circumstances. For example, you may be on a different tax code if you have underpaid HMRC in a previous tax year and need to make up this shortfall.

Bear in mind, the rules state that you are responsible for checking your tax code is correct (and not HMRC or your employer).

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Emergency tax

If HMRC doesn’t receive your income details after a change in your circumstances, you may be put on what’s known as an ‘emergency’ code, which could mean you pay more tax than you need to.

This is because you won’t receive the tax-free allowances that you are typically entitled to on your income.

There are several reasons an emergency code might apply. These include:

• Starting a new job without a P45
• Starting your first job after the beginning of the tax year
• Starting a new job after having had another job(s) or received taxable state benefits
• Starting a new job, having previously been self-employed

What does an emergency code look like?

The emergency code for the 2024/5 tax year is 1257L, which is a bit confusing since it's the same as the code for taxpayers who are entitled to the basic Personal Allowance.

However, the 1257L emergency code may be followed by W1 or M1. This part of the code indicates that each week or month is being dealt with separately.

If you think you’re paying emergency tax, ask HMRC to send you and your employer the correct tax coding.

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How to claim an Income Tax refund

If you believe you're entitled to a refund, you should contact HMRC and ask it to investigate your payment history.

You can do this by calling 0300 200 3300 or putting your request in writing through the HMRC app, via your online account or by post.

Any correspondence to HMRC should include:

• Your name and address
• Your National Insurance and PAYE reference (shown on your pay slips)
• The reasons you think you’re entitled to a refund
• Your employment history
• Your bank details (if your refund can be transferred to your bank account, it may speed the process up)

If you’re sending a letter through the post, it’s also a good idea to enclose copies of your P60s and P45s.

Note, you'll need to complete Form P50 if you've stopped working and believe you're entitled to a refund.

How long will it take HMRC to investigate?

Under its current targets, HMRC aims to ‘clear’ 95% of correspondence within 40 working days, with its latest data revealing that it met this target in 92.1% of cases in January (or 88.2% year-to-date since April 2023).

If you’d like to track the status of your claim, you can use HMRC’s online tool, which provides a date by which you should expect to receive a reply.

To use the tool, you’ll need to provide information about the method you used to contact HMRC and the date of your correspondence.

If you need to contact HMRC to chase your claim, keep a log of any calls, including the date and time and the name of the person you spoke to.

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HMRC may contact you

If you have over (or under) paid on tax, HMRC should send you a P800 letter, which is also known as a ‘Tax Correction Notice’.

This is a personalied letter and should indicate how much your refund will be and how you’ll receive your money.

Although P800 letters are typically sent at the end of the tax year, you can receive them at any point.

How will I get my refund?

You can claim your refund online through HMRC’s bank transfer service or request a cheque.

You should receive a refund within five working days if you claimed online and within six weeks if you asked HMRC to send you a cheque.

If you’re owed money from multiple tax years, you should receive one payment for the full amount.

Where your underpayment relates to the current tax year, HMRC will inform your employer of your amended tax code and you’ll normally receive your refund via your wages.

If you're received a P800, your letter will explain how you will get your refund.

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