How to get a tax refund

Sometimes when you're working you can end up paying too much Income Tax particularly if you change jobs often or have more than one job at the same time. If you think you've paid too much tax you can take some simple steps to apply for a refund.

When might you have overpaid tax through your job?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 Student Employees
• you had more than one job at the same time
• other income you have that is taxed through your tax code for example, savings/investment income has reduced since you last told HM Revenue & Customs (HMRC) about it - which means the amount of income included in your tax code is too high
• you stopped working and didn't get any taxable earnings or benefits for the rest of the tax year
• your circumstances changed - for example you changed from full to part-time working or became self-employed
• you were made redundant
• you received payments after leaving such as arrears of pay, payments in lieu of notice, unpaid holiday pay, redundancy or termination payments including compensation for loss of office or employment

PAYE (Pay As You Earn) and tax codes.

Your tax code is issued by HMRC and based on information they have about your income and entitlement to allowances. You'll find it on your PAYE Coding Notice (it’s usually sent to you before the start of the tax year and it may also be sent to you at other times if something has changed). Not everyone gets a Coding Notice but the code can also be found on your P45 or your payslip. It tells your employer what your tax-free allowances are and how much tax to deduct from your wages before you get paid. This way of paying tax is called PAYE. If you have several jobs or you work and get a pension you may have more than one tax code. It's important to know what your tax code means so that you can check that you are paying the right amount of tax.

Income Tax Refund

If you've just stopped working, you may be able to claim back some of the Income Tax you've paid. This could be because you've retired, returned to studying or because you've become unemployed.

This guide explains when an Income Tax refund might be due to you and how to claim it.

When a tax refund might be due A tax year runs from 6 April to 5 April. If you stop working part way through a tax year, you might have paid too much tax for that year.

This can happen if you were paying tax through PAYE (Pay As You Earn) as an employee and:

• you were only employed for part of the tax year and didn't get any taxable state benefits for the rest of the tax year after you stopped working
• you retired part way through the tax year
• your employer was using the wrong tax code
• you're a student and only worked in the holidays but didn't complete a form P38(S) Student Employees
• you were made redundant and couldn't get another job
• you received payments after leaving such as arrears of pay, payments in lieu of notice, unpaid holiday pay, redundancy or termination payments including compensation for loss of office or employment

If you're self-employed, you have to make 'payments on account' of your next year's tax bill. If you've made payments on account of the tax due for the year when you stop working, you might have paid more than you have to.

Whether you were employed or self-employed before you stopped work, if you've paid too much tax you'll be able to claim a refund of the amount that you've overpaid.

National Insurance Contributions

Whether you're employed or self-employed or both, there's a limit to the amount of National Insurance contributions you need to pay. If you overpay or wrongly pay National Insurance contributions you can claim the money back. And if you wrongly pay voluntary National Insurance contributions you may be able to claim the money back in certain circumstances.

When might you overpay or wrongly pay Class 1, 2 or 4 National Insurance contributions? You might have overpaid or wrongly paid National Insurance contributions if:

• you had more than one job and your combined earnings were more than £817 a week (2012-13 tax year)
• you stopped being self-employed and continued to pay Class 2 National Insurance contributions
• you paid Class 2 National Insurance contributions and your profits were less than £5,595 a year (2012-13 tax year)
• you were employed and self-employed in the same year and paid more than you needed to in Class 1, Class 2 and Class 4 National Insurance contributions
• you were still working after reaching State Pension age and your employer continued to deduct Class 1 National Insurance contributions from your earnings
• you were still working after reaching State Pension age and you continued to pay Class 2 National Insurance contributions on your self-employment earnings
• you paid Class 4 National Insurance contributions on profits for a tax year after the one in which you reached State Pension age or on profits that included 'employed earner's' income (income that you earned as an employee and on which you've already paid Class 1 National Insurance contributions)

If you've made an error, missed something off your tax return or think you've paid the wrong amount of tax you may still be able to sort it out. If HM Revenue & Customs (HMRC) accept your new figures, you'll receive a repayment or be told how much extra tax to pay.

Correcting mistakes within 12 months

If you make a mistake on your tax return you've normally got 12 months from 31 January after the end of the tax year to correct it. This is called an 'amendment'. For example, for the 2011-12 return you have until 31 January 2014 to make an amendment.

You can only amend your return after this date if you received your return late (after 31 October). In this case you must correct any mistakes within 12 months of the deadline for sending your return back.

If you sent your tax return on paper, you don't need to send in the whole tax return again. Just write to HMRC and attach the return pages that you want to change, clearly marked 'amendment'. You'll find the address on your tax return, your tax calculation or your Self Assessment Statement.

If you sent your tax return online it's easier if you make the amendment online too.


Getting a refund

If you think a refund is due you'll need to tell HMRC how you'd like to receive it.

For convenience you can have it deducted from any tax due on your next Self Assessment Statement if either:

• it's less than £10
• a tax payment is due shortly

Or you can ask for one of the following:

• a repayment direct to your bank or building society account - this is quick and secure
• a cheque, however this will take a little longer to reach you

Sometimes HMRC may ask you for more information - to make sure that the figures are correct - before making a repayment.

Paying additional tax If you owe more tax as a result of the changes to your tax return, HMRC will tell you how much you need to pay and when and how to pay it.

Correcting mistakes after 12 months If you want to tell HMRC about a mistake after 12 months, it's too late to amend your return. You have to write to HMRC and tell them about the mistake instead.

Getting a refund In most cases, you'll get the tax you've overpaid back, as long as you claim it in time.

You must make a claim within four years of the end of the tax year that you're claiming for. For example if you paid too much tax in the 2008-09 tax year, you must make a claim by 5 April 2013.If you don't make a claim within the time limit you'll miss out on any repayment due.

You must make your claim in writing and it should include:

• the tax year it relates to
• why you think you've paid too much tax
• evidence of the tax that's been paid
• your signature
• how you would like to receive any repayment due

Sometimes HMRC may ask you for more information - to make sure that the figures are correct - before making a repayment.

For convenience you can have the repayment deducted from any tax due on your next Self Assessment Statement if either:

• it's less than £10
• a tax payment is due shortly

Or you can ask for one of the following:

• a repayment direct to your bank or building society account - this is quick and secure
• a cheque, however this will take a little longer to reach you

Paying additional tax If you owe more tax as a result of a mistake you've made, you should provide as much detail as possible when you tell HMRC. HMRC will work out the amount due and ask you to make a payment. Depending on the circumstances, you may have to pay interest on the amount due.

Interest on late payment and repayments If you pay tax late or receive a repayment late, HMRC will add on any interest that's due. The rates of interest vary - the rate as at Feb 2013 is 3% per annum calculated pro rata.

If you need more help To get more help you can contact your HMRC office or speak to Tax Affinity Accountants and we will be happy to help.

If you do not complete a Self Assessment tax return but want to claim a tax refund, speak to HMRC as they are the only ones that can help.

Tax Affinity Accountants based in Kingston upon Thames, are expert accountants and tax advisers. To read more visit www.taxaffinity.com/blog.

Please feel free to comment and share this article with your friends. Follow us on www.twitter.com/tax_affinity.