Using Our Tax Refund Calculator

Employees - Check if you are due a tax rebate using our Tax Refund Calculator
Most employees do not give a second thought about the amount of tax deducted from their payslips. After all, under PAYE income tax is deducted at source so most people do not bother to check if they may have paid too much tax in the first place… And if they do, they often find themselves at a loss trying to make sense of their payslips.

So, how can you check easily if you may have overpaid income tax without knowing it? Here are a few useful tips

First, it is important to have a minimal understanding of personal allowances and tax codes. HMRC can only assess if you have paid the correct amount of tax or not once the tax year has ended. This way, they can total up what you’ve earned in the year with the amount of income tax you paid in that period. Under PAYE (the ‘Pay As You Earn’ tax system for employees, designed to deduct income tax at source) tax payers are entitled to receive a personal allowance. It is the tax free amount that anyone in the UK is entitled to earn without having to pay any income tax, within a tax year. The personal allowance rates change nearly every year. They are reflected in the coding notice (‘tax code’) that HMRC communicates to employers so their payroll department deducts the correct amount of income tax from the employees’ wages (amounts which they then forward to HMRC). The rates of personal allowance and the relevant tax codes since 2009 are:

A ‘BR’ tax code means that HMRC will charge the ‘Basic Rate’ of income tax on earnings, currently set at 20%. This means that HMRC will not apply any personal allowance against that employment. It is normal that a BR tax code is applied to a second job you may hold, as the personal allowance is only allocated against your main job. This means that if you have 2 separate employments (you work 2 jobs at the same time), your second job should normally have a BR tax code against it.

Sometimes, a BR tax code is allocated against your main job. This usually happens in the period following someone starting new employment, when HMRC is reviewing the employee’s tax position and before they communicate the correct tax code to the employer’s payroll department. Any overpayment of tax is normally refunded automatically by HMRC through the employee’s wages. So, if you just started a job and you are on a ‘BR’ tax code, there isn’t much to worry about, you should normally be refunded the tax you’ve overpaid, usually within a few weeks or a couple of months. This is called a ‘tax refund’ (or ‘tax rebate’). Many tax payers receive automatic refunds that way.

However, in some cases, the situation doesn’t get resolved and the BR tax code remains – all of your income is charged at the 20% rate from that point on, without you receiving any portion of your tax-free personal allowance. So, why is that? This generally indicates that HMRC is unclear as to your precise income in a particular tax year. So, because they are not clear on your precise earnings or any personal allowance in that year, they decide to charge you at the 20% rate, just to make sure that you don’t underpay tax. It doesn’t really matter to the taxman if you end up overpaying tax as a result, ultimately all he’s interested in is that you pay tax every time you earn!

HMRC’s view is that it is down to the individual to prove that they have paid too much income tax… and they won’t apply the correct amount of personal allowance unless they are 100% clear on the income you earned in that tax year. Some taxpayers end up overpaying hundreds or even thousands of pounds over the years, without necessarily realising it! According to HMRC’s own statistics, 1 in 3 taxpayers could be paying too much tax.

The reason for HMRC not being clear on one’s income can be varied. This can happen especially if you failed to give a new employer the P45 from your previous job (or Benefit centre if you claimed Job Seeker Allowance or Employment Support Allowance). Maybe a former employer didn’t communicate to HMRC your precise income figures (which they should have done by law). Maybe the actual employer went bust and didn’t keep records of their employees’ deductions. Another likely reason is if HMRC realise that at some point you made an application for JSA/ESA and they don’t know how much benefits you may actually have claimed. Because JSA/ESA are taxable benefits, they count as income received towards your tax-free personal allowance. So unless HMRC are certain of the amounts of benefits you may have received, they will not be able to calculate your personal allowance. This is why enlisting the help of an experienced tax agent like TaxRefundPro could be so beneficial as we have the expertise in unblocking these particular situations and get our clients’ money back where it belongs… in their pocket!

People who are the most likely to fall in that scenario are:

  • Workers who have worked for multiple employment or temporary agencies as many employment agencies fail to give them a P45 when they ‘come off their books’ (because they found employment elsewhere or went back to claiming benefits)
  • People who had multiple employments in the last 5 years, going in and out of periods of claiming JSA/ESA If this sounds like your situation, then don’t delay and get in touch so we can advise you further on how to claim back your overpaid tax, with no obligation to use our services. You may not have all the necessary P45 and P60 documents to work out what your income has been in the last few years but don’t worry, we can help you bridge the gaps if you decide that you wish to make a claim with us.

If however, you enjoyed a stable employment history (say, you have been with the same employer for at least 2 years), then the chances are you would have paid the correct amount of tax and therefore you would not be due a refund. Your employer & HMRC would have applied the correct coding notice (which for most people is 810L for the 2012-2013 tax year and 944L for the 2013-2014). If in doubt, you can easily check this by using our tax calculator.

Related articles

EU Temporary Migrant Workers To Lose Their Tax-Free Personal Allowance Entitlement

EU Temporary Migrant Workers To Lose Their Tax-Free Personal Allowance Entitlement

Up to a quarter of a million people, who live and work in the UK for less than six months of the year, should lose their entitlement to personal allowance, currently worth £10,000 a year. On August 12, Chancellor George Osborne revealed tough new measures aimed at curbing down the influx of seasonal workers from EU countries.

Top 10 Tax Credit Renewal Excuses Revealed

Top 10 Tax Credit Renewal Excuses Revealed

Yesterday, HMRC revealed a best off compilation of excuses (some quite hilarious) used by tax credits claimants. This is a fun way to remind anyone wishing to renew their tax credits that they have until July 31 to do so, otherwise they could face losing their entitlement.

HMRC Cracks Down On Undeclared Income In The Health and Wellbeing Industry

HMRC Cracks Down On Undeclared Income In The Health and Wellbeing Industry

HMRC is using its Health and Wellbeing campaign to encourage professionals in that industry to come forward. The Health and Wellbeing Tax Plan was a campaign that gave health professionals an opportunity to tell HMRC about income still undeclared and get the best possible terms by making a ‘voluntary disclosure’.

Wear & Tear Tax Allowance For Furnished Lettings

Wear & Tear Tax Allowance For Furnished Lettings

Most landlords would already be aware of the ‘Wear & tear allowance’ for furnished lettings, but many are still confused about what it covers. According to HMRC, it refers to “the provision by the owner of plant or machinery, including furniture, for use in a residential property”. Because these items do not qualify for capital allowance, a deduction may be available for a wear and tear allowance.

Tidy Up Your Tax Affairs When Leaving The UK

Tidy Up Your Tax Affairs When Leaving The UK

Emigrating is a truly life-changing event, with so many important things to plan ahead. Most people who are serious about emigrating will carefully prepare their new life ‘down under’ in order to muster any chance of success. So you’ve sorted out your visa and a place to stay? Good. And you secured that new job too? Excellent. Packing & moving arrangements all done? Splendid!