Most people assume that if they’ve paid too much tax, HMRC will automatically refund it.
Sadly, that’s not always how it works.
In many cases, if you’re due a tax refund, you may need to take action to claim it. And with the cost of running a business rising, it’s worth checking whether HMRC owes you money.
So, how do tax overpayments happen, and what can you do about them?
Let’s break it down.
Why Might You Have Overpaid Tax?
There are several reasons why you might end up paying more tax than necessary.
For example:
- Your income has fallen, but you’ve already made payments on account through Self-Assessment
- You’ve been given the wrong tax code through PAYE
- You only worked for part of the year and didn’t benefit from your full personal allowance
- Your circumstances changed and HMRC didn’t update things quickly enough
Have you had a change in income recently? Or started or stopped employment part way through the year? These situations can often lead to an overpayment.
How Do You Know If You’ve Overpaid?
There are a few ways a tax refund might come to light.
If You Don’t Complete a Tax Return
If you’re not in Self-Assessment and you’ve paid too much tax, HMRC may send you:
- A P800 tax calculation, or
- A Simple Assessment letter
These are usually sent between June and March after the end of the tax year.
The letter will explain:
- That you’ve overpaid
- How much you’re owed
- What you need to do next
If You Are in Self-Assessment
If you complete a tax return, you won’t receive a P800.
Instead, you’ll usually discover an overpayment when your return is submitted and your payments are taken into account.
It’s worth remembering that HMRC’s calculation software doesn’t always show payments already made straight away, so the refund may only become clear once everything is deducted.
Checking Yourself Online
You can also check whether you’ve paid too much tax by logging into:
- Your Personal Tax Account
- The HMRC app
It’s a quick way to stay on top of your tax position.
How Do You Claim a Tax Refund?
If HMRC doesn’t automatically send the money back, you can claim your refund in a few simple ways:
- Online via GOV.UK using the refund tool
- Through your Personal Tax Account
- Using the HMRC app
In most cases, refunds claimed online are paid within five working days.
What If HMRC Sends You a Cheque?
Sometimes the tax calculation letter will tell you that HMRC will send a cheque automatically.
If that’s the case, you don’t need to do anything — it should arrive within around 14 days.
Refunds and Self-Assessment Payments
If you’re in Self-Assessment, HMRC may hold onto a refund if you have another tax payment due soon (such as a payment on account within the next 45 days).
Instead, they may simply offset the refund against your upcoming bill.
Do You Get Interest on Overpaid Tax?
Yes — HMRC pays interest on overpaid tax at:
- 1% below the Bank of England base rate
- With a minimum interest rate of 0.5%
It won’t make you rich, but it’s still your money!
Need Help Claiming a Tax Refund?
If you think you may have overpaid tax, it’s well worth checking sooner rather than later.
At Jon Davies Accountants, we help individuals and business owners make sure they’re paying the right amount — and claiming back anything they’re owed.
Get in touch with Jon or the team today if you’d like help reviewing your tax position or claiming a refund from HMRC.
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Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk