How Much Do You Need for a House Deposit in 2025?

Introduction

Has anyone ever felt that by paying an excess amount of Income Tax, he or she has given an interest-free loan to the HMRC? The job might have changed mid-year; there were more than one employers; the tax code just was not 100 percent accurate.

Good news: if you have made an excessive payment, there is a very strong possibility of getting the money back. This article gives explanations on why overpayments occur, what happens "usually" next with HMRC, and how to go about claiming your refund, with the least amount of inconvenience.

The Recurring Situations of Overpaying Income Tax

Overpayment is a more common situation than most people realise. Below are a few of the most common ones:

Wrong tax code — The code applied being incorrect for your particular situation puts you at risk of paying too much.
Change of job — Sometimes misalignment in PAYE records may cause an overpayment.
Multiple sources of income — HMRC might not apply your personal allowance correctly.
Emergency tax — When you start working without a P45.
One-off income – Any payment that puts you temporarily in the higher tax band. For example, a redundancy payment or a bonus.

What HMRC Does About Overpayments

Automatic Refunds under PAYE

For the employee, with PAYE mechanism applied to one, HMRC will usually discover the overpayment some time after the tax year ends (5 April).

There will usually then be an issued P800 tax calculation advising you of what you are owed. A Simple Assessment will normally be issued in the case where they think you owe tax and not where you are due a refund.

Generally, you will then be asked to claim online and to have the refund paid into a nominated bank account. Should you fail to do so, a cheque will be sent to you after some period of time.

Self Assessment Adjustments

If you file a Self Assessment return, any overpayment may be set off against your next bill or be refunded after processing the return.

Getting Your Refund

If a refund should locate its way to you but HMRC don't seem to have done so, then the following offers the faster approach:

Check your tax code — You can check that yours is the correct one by means of HMRC's tax code checker.
Collect supporting evidence — P45, P60, recent payslips, letters, or emails from HMRC.
Claim online — Use the Claim a tax refund service, where claims are mainly due to PAYE-based overpayments.
Send in a claim — When the above does not apply, write to HMRC stating your details and enclosing copies of supporting documentation.
Contact HMRC — Where cases are more complicated and/or time-sensitive, the Income Tax helpline can be utilized.

How Long Is It Before a Refund?

Online claims: Usually paid within 5 working days directly into your bank account.
Postal claims: Usually take up to 8 weeks.
Automatic refunds — You can expect a payment several weeks after issuance of P800 (by cheque if you do not claim it online).

Tip: Got moved recently? Change your address with HMRC straight away to avoid any delays.

Some examples of overpayment scenarios

Example 1: Mid-year change of job

Sophie stopped full-time work in November and started her new job in December. Her new employer made an incorrect assumption as to her personal allowance, resulting in Sophie overpaying taxes.

HMRC had set up an end-of-year check against the PAYE system and in July returned £420 to Sophie.

Example 2: Emergency tax

Ali started his seasonal employment without his P45, making him be charged emergency tax and pay more.

After receiving his P45 halfway through the season, HMRC recalculated the taxes and refunded £185 directly into his bank account.

Common mistakes to avoid

Ignoring your tax code; even a tiny one can cause overpayments.
Ignoring letters from HMRC- Refunds get lost if HMRC are unable to contact you owing to wrong information.
Just waiting for HMRC to act- Most of the time they do; however, some situations require your direct intervention.

Your rights and time limits

You can put in an application for tax refund for the last four tax years.

On this interpretation, one would be able to put in a claim for a refund of income tax from the 2021/22 tax year upward through 2025/26 just before the window closes.

Once this window closes, HMRC would no longer entertain payment of refunds on those years.

Conclusion

An overpayment of income tax is not a death knell; however, it is an unwanted loss of hard-earned money that should not be at the mercy of one's fate.

Understand how it can happen, watch out for HMRC's P800, and where possible, claim online. This way, more of what you earn goes to where it belongs: in your pockets.

For personalised take-home pay estimations, try our salary calculator.