Will I get an income tax rebate?

As the end of the tax year approaches, if you think you’ve paid too much tax, you might be wondering whether you will get an income tax rebate.

Happy couple who have received an income tax rebate letter

If you think you’ve paid too much tax, you might be wondering when and if you will get an income tax rebate.

With an estimated one in three people paying too much tax, it could be that you have been overpaying. Many people are unaware that they could be owed potentially thousands of pounds in the form of an income tax rebate. It’s especially timely as the cost of living continues to escalate. Families are feeling the financial pressure from all sorts of areas, such as insurance tax hikes, energy bill rises, and inflation. But while you may be owed a rebate, it is just as likely that you may have underpaid and actually owe more tax. If you have underpaid, you will have to pay it back eventually, so it's best to find out as soon as possible.

The deadline to claim for overpaid tax from the 2017/18 tax year is 5 April 2022, so act fast to get your income tax rebate if you're owed.

Lisa Conway-Hughes (opens in new tab), independent financial advisor, says: “It is particularly important now to make sure you aren’t overpaying on anything - mortgages are on the rise, inflation is sky high, rail fares are up and we are about to see a National Insurance increase too.”

Ensuring you are not overpaying on tax could make a significant difference to your bank balance, as household finances continue to be squeezed. It is also worth being aware of any deadlines to reclaim any overpayments from previous tax years to make sure you claim what you are owed.

Will I get an income tax rebate?

In simple terms, you will get an income tax rebate if you have paid too much income tax. This is measured over the course of the tax year, which runs each year from 6 April to 5 April the following year. Most people find they are due a tax rebate if they are put onto the wrong tax code. Kalpana Fitzpatrick, editor of The Money Edit (opens in new tab), explains: “Your tax code, which is made up of letters and numbers, is issued by HM Revenue & Customs. But it is your responsibility to check that it is correct, especially if your situation has changed.”

For example, if you’ve changed jobs or gone on maternity leave during the tax year and your Pay As You Earn (PAYE) code is not adjusted properly, you may have overpaid income tax and be due a rebate. If you switched from full-time to part-time work or only had a job for part of the tax year during the pandemic you may have also overpaid.

How will I know if I am due an income tax refund?

It’s best to never assume that you are on the correct tax code. You should definitely double check your tax code if you have recently:

  • Started your first job
  • Changed jobs
  • Started getting employee benefits like a company car or health insurance
  • Been earning income from more than one source, whether a second job or taxable state benefits (opens in new tab)
  • Retired or have more than one pension.

To check your tax code for the current tax year, previous tax year, and upcoming tax year, you can take a look at the government website (opens in new tab).

An online tool such as the MoneySavingExpert tax code calculator (opens in new tab) is also really useful. This will compare your current tax code to the most common tax code for your salary. While just an estimate, it could be a good indicator of an incorrect tax code.

Where can I find my tax code and what does it mean?

You should be able to find your tax code on your payslip. You could also find it on a P60 or P45 form that you may have been sent by your employer. It will be a series of numbers and letters, for example, 1257L. If you live in Scotland, there will be an S at the beginning of your tax code. If you live in Wales, your tax code will begin with a C.

The numbers refer to how much you can earn without paying tax. This is also known as your personal allowance. On tax code 1257L, your personal allowance is £12570 for the 2021-22 tax year.

The letter L means you are entitled to a standard tax-free personal allowance.

If you are employed, this code determines how much tax you pay through PAYE. This means it’s paid out of your salary before it comes to your bank account. If the tax code is incorrect, you could be paying too much (or not enough) tax.

For those who live in England or Northern Ireland, have one job (without benefits like a company car) and earn up to £100,000 a year, your tax code will likely be 1257L.

If your tax code ends in W1, M1 or X, that is a sign you are on what is known as an emergency tax code (opens in new tab). This can happen when there is a delay in HMRC receiving details of a change in your circumstances. Being on an emergency tax code can result in you paying more in income tax than you ought to.

If you are unemployed or self-employed, you won’t have a tax code. In the case of being unemployed, this is because you won’t pay tax. If you are self-employed, you pay tax through a process called self-assessment.

If you think you are on the wrong tax code, it’s important to contact HMRC - the government department for the collection of taxes - as soon as you can.

Have I overpaid income tax and how do I get it back?

If you’ve looked at your tax code and think you may have overpaid your tax, you can use the government income tax calculator (opens in new tab) to estimate how much you may be owed. You can then take this estimate to HMRC either by letter, filling out an R38 form, or logging onto your personal tax account (opens in new tab) to claim a refund. How long it takes to get an income tax refund depends on how much you are owed.

If you have overpaid in the current tax year on your current tax code, HMRC can inform your employer to pay it back. The overpayment can be paid back to you in your pay packet each month until fully refunded.

If, at the end of the tax year, HMRC has found you have overpaid tax, you should receive a P800, or Simple Assessment, letter. This will also explain how you can claim what you are owed via the government’s website (opens in new tab).

The tax year ends on 5 April 2022, so don’t expect such a letter before then - it usually arrives around September time. If you find that you have over or underpaid before receiving a letter, then make sure you contact HMRC immediately.

If you get a letter that says you can make your claim online, you will get a refund in your bank account in around five days. If you do not claim within 21 days, the government will send you a cheque in the post. You will get this cheque within six weeks of the date on your P800.

However, if your letter states that HMRC will send you a cheque, you do not need to make a claim. You should automatically receive your cheque within 14 days of the date on your P800. If you have contacted HMRC saying that you think you are on the wrong tax code, and they agree, they will then send you a P800.

How do I know if I’ve overpaid in previous years?

If you think you might have been on the wrong tax code for more than the current tax year, all is not lost. The good news is that you have four years from the end of the tax year to claim a refund. For example, the deadline to claim tax overpaid in 2017/18 is 5 April 2022. You should know if you’ve overpaid income tax in previous years because HMRC reviews everyone’s earnings at the end of each financial year. This is the case whether you pay tax via PAYE or via filing a tax return. Under this annual review, you should receive an income tax rebate automatically from HMRC if you are owed one.

“However, if HMRC feels that you have either overpaid or underpaid then they will send you a P800 or a simple assessment tax calculation,” emphasises Conway-Hughes.

If you’ve found that you’ve overpaid outside of the four-year claim window, you may still be able to claim. Speak to HMRC to see if your circumstances mean you are still eligible for a refund.

What happens if I’ve underpaid my income tax?

By checking your tax code, you may have also found that you have in fact underpaid income tax. If you’ve underpaid you will be notified by a P800 letter. Usually, you’ve underpaid your income tax because you have changed jobs or have more than one source of income. “Someone who started self-employment during the pandemic may not realise that their profits are taxed and may therefore have underpaid tax,” adds Stefanie.

HMRC is obligated to notify you of underpayment within 12 months and usually does so between June and October.

The P800 letter will explain if you can pay what you owe online.

If you have underpaid tax and you have PAYE income, HMRC should try to collect the tax through your PAYE code in instalments. This should take place over the following tax year. Depending on the amount you owe, they may ask for it in a lump sum.

However, if this is going to be a struggle for you, you can ask HMRC to arrange a payment plan. This means you can spread what you owe over a longer period of time - sometimes several tax years. In the event HMRC does not notify you of the underpayment error within 12 months you can ask them to drop any payment demand.

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Katie Binns is Staff Writer for The Money Edit (opens in new tab). She spent 10 years at the Sunday Times where she covered news, culture, travel and personal finance. She’s interviewed high-profile individuals such as Spice Girl Mel B, Maria Sharapova, Lord Sugar and Stella Creasy MP to discuss personal issues such as financial abuse, bankruptcy, gambling addiction and debt. She loves helping people feel more confident about their finances and has experience mentoring people on learning to budget, save and invest. Her investigative work on financial abuse has resulted in a number of mortgage and debt prisoners being set free - and nominations for the Best Personal Finance Story of the Year in the Headlinemoney awards in 2021 and 2022. She was awarded Personal Finance Journalist of the Year at the British Bank Awards in 2022. She can be found on Twitter @kt_binns talking about finances, food and swimming.