What are Tax Refunds?
A tax refund is a refund of tax which has been overpaid. There are various reasons why tax may have been overpaid, including:
• You start a new job and are taxed under an emergency code for a short time.
• You marry or enter a civil partnership and you or your spouse or civil partner are born before 6 April 1935.
• HM Revenue and Customs (HMRC) sends the wrong tax code to your employer or your employer uses an incorrect tax code.
• You are self-employed and you make payments on account for the following year, under the Self-Assessment scheme. Your business has a bad year, so these payments are too high. You have not made a claim to reduce your payments on account and your final tax liability turns out to be less than the tax you have actually paid.
• You’re a pensioner with more than one occupational pension and your tax-free personal allowances have not been allocated properly so you’ve paid too much tax.
• You have more than one job. The employer at your second job will automatically deduct tax at a basic rate so you may not get the benefit of all your tax-free personal allowances. This will frequently apply if you are a student or a low-paid worker.
Refunds under PAYE or Self-Assessment
If you overpay tax under PAYE or Self-Assessment, you can make a claim for a refund.
If you are on strike, a refund will only be paid to you either when you leave the job or when you go back to work. You will not get a refund at the end of the financial year.
Refunds following a death
An overpayment of income tax may arise following a death. If a refund of tax is made, it is counted as part of the estate of the person who has died.
Refunds of tax on savings interest
You may pay too much tax on savings interest. If so, you can make a claim for a refund.
Refunds of tax overpaid on pensions or on cashing in small pensions
You may pay too much tax on your pension or when you cash in a small pension.
Time limit for claiming a tax refund
The time limit for claiming a tax refund is four years from the end of the tax year for which you overpaid tax. A tax year runs from 6 April one year to 5 April the following year.
If you think you might be entitled to a refund, claim now so that you don’t lose the right to claim.
Interest on refunds
HMRC must pay interest on a tax refund if the repayment is made after 31 January following the end of the tax year in which you overpaid the tax.