As the UK tax season approaches, it’s time to check if you are due a refund from HM Revenue and Customs.
Errors are not as rare as HMRC would have most taxpayers believe – last year, 460,000 claims for refunds worth £7 billion were made.
Reasons for overcharging tax range from tax code reviews when changing jobs to withdrawing cash from a pension.
Becky O’Connor, a personal finance specialist at financial firm Royal London, said: “Nearly half a million people tried to get overpaid income tax back from HMRC in the last tax year.
“This goes to show it’s a good idea not to assume the taxman is always right about what he says you owe. Instead, always check your tax statement for the year and keep a note of any unusual changes to your income that might mean you have overpaid.”
PPI tax hack
Many taxpayers are overpaying income tax charged on interest received as a payment protection insurance (PPI) claim.
Many non-taxpayers who have collected a PPI repayment will have had the interest amount covered by their personal allowance but tax deducted at the source of the interest.
“If you have received a pay-out for PPI compensation, it is worth checking the statement for details of any tax paid on the interest element of your refund. If it was and tax was not due because the interest income was within your personal allowance or you are a non-taxpayer, you may be entitled to request a refund,” said O’Connor.
Reclaiming overpaid income tax
Anyone who believes they have overpaid income tax on savings and investments can fill in an HMRC Form R40.
Here are some of the circumstances in which you might apply for a refund of overpaid tax:
- Pay from your current or previous job
- Pension payments
- Income from a life or pension annuity
- A redundancy payment
- A self-assessment tax return
- Interest from savings or PPI
- UK income, like rents, if you live abroad