HMRC has begun sending out letters to thousands of taxpayers who are owed a refund due to overpaid tax. All the Self Assessment tax returns have been submitted to HMRC; they have begun their annual task of sending letters to those lucky taxpayers who have overpaid tax for the past financial year.
This unexpected windfall comes as a result of errors in tax calculations, often linked to incorrect tax codes or overlooked allowances. This refund could provide much-needed relief for families grappling with the ongoing cost-of-living crisis. In this blog, we’ll explore why these refunds are being issued, who is eligible, and what steps you should take if you receive one of these letters.
Why is HMRC issuing refunds?
HMRC has identified those taxpayers who have overpaid their income tax due to errors in their tax codes or because they failed to claim the allowances they were entitled to. Several elements can contribute to these inconsistencies, including:
1. Incorrect tax codes
If HMRC has the wrong information about your income or employment status, it can lead to an incorrect tax code being applied. This often happens when individuals switch jobs, have multiple sources of income, or receive taxable benefits.
2. Unclaimed marriage allowance
If you’re eligible, the Marriage Allowance enables you to give a part of your tax-free earnings to your partner. Many people are unaware of this benefit or fail to claim it, resulting in overpaid tax.
3. Workplace benefits
If you receive benefits from your employer, such as a company car or private healthcare, these can affect your tax code. Errors in reporting these benefits can lead to overpayment.
4. Pension contributions
Changes in pension contributions or errors in reporting them can also result in incorrect tax calculations.
HMRC aims to rectify these errors and ensure that taxpayers receive the refunds they are owed.
What should you do if you receive a letter?
If you receive one of these letters, it’s important to take the following steps:
1. Read the letter carefully
The letter will explain why you are owed a refund and how the amount was calculated. Make sure you understand the details before taking any further action.
2. Check your details
Ensure that the information HMRC has used to calculate your refund is accurate. This includes your income, employment status, and any allowances or benefits you receive.
3. Contact HMRC if necessary
If you believe there is an error in the refund amount or if you have any questions, contact HMRC using the details provided in the letter. You can also use the HMRC app or online portal to get in touch.
4. Claim the marriage allowance
If you are eligible for the Marriage Allowance but have not yet claimed it, you can do so online via the HMRC website. The process is straightforward and could result in a significant tax saving.
5. Keep records
Make sure to keep a copy of the letter and any correspondence with HMRC for your records. This will be useful if you need to refer back to it in the future.
6. Claim your refund promptly
If you didn’t specify how any refund should be made to you, HMRC typically sets a deadline for claiming refunds. Don’t delay in following the instructions to ensure you receive your entitlement.
7. Be wary of scams
How to avoid overpaying taxes in the future?
While receiving a refund is a welcome surprise, it’s even better to avoid overpaying tax in the first place. Here are some practical steps to ensure your tax affairs are in order and prevent future discrepancies:
1. Regularly check your tax code
Your tax code is the foundation of how much tax you pay. If it’s incorrect, you could end up overpaying or underpaying. You can find your tax code on your payslip. If you notice any inconsistencies, contact HMRC immediately to have it corrected.
2. Update HMRC on life changes
Significant life events, such as changing jobs, getting married, or retiring, can impact your tax situation. Make sure HMRC is informed of these changes promptly to ensure your tax code and allowances are updated accordingly.
3. Claim all eligible allowances and reliefs
Many taxpayers miss out on allowances and reliefs they’re entitled to, such as the Marriage Allowance, working-from-home allowance, or tax relief on professional subscriptions. Take the time to research what you’re eligible for and claim it through HMRC’s online portal.
4. Review your payslips and P60s
Regularly review your payslips and annual P60 to ensure the right amount of tax is being deducted. If you spot any errors, raise them with your employer or HMRC as soon as possible.
5. Use the HMRC app
The HMRC app is a convenient tool to manage your tax affairs. You can check your tax code, track your refund, and update your details directly from your smartphone. It’s a great way to stay on top of your tax obligations.
6. Seek professional advice
Tax can be complex, and mistakes can be costly. If you’re unsure about your tax situation, consider consulting a qualified accountant or tax advisor. They can help you navigate the rules, claim what you’re owed, and ensure compliance.
FAQs
There’s a good chance HMRC sent you the letter because you’ve paid too much tax. This can happen for simple reasons — maybe you changed jobs, worked part of the year, or had the wrong tax code. HMRC checks your records at the end of the tax year and lets you know if you’re due money back.
Before you celebrate, make sure the letter is real. Here’s what to look for:
- It should have your full name, National Insurance number, and a reference number.
- HMRC letters come by post, not email or text.
- They’ll never ask you to share bank details by clicking a link or replying to a message.
If you’re unsure, sign in to your HMRC online account to double-check. If there’s a refund listed there, it’s genuine.
A P800 is a tax calculation letter from HMRC. It shows whether you’ve paid the right amount of tax, and if it says you’ve overpaid, you’ll be offered a refund.
Here’s what to do next:
- Log in to your HMRC online account.
- If a refund is due, you’ll see a message saying you can “claim your tax refund.”
- Follow the steps to have the money paid directly into your bank.
If you don’t claim online, HMRC will usually send you a cheque by post. The process is quite straightforward once you log in.
When you hear about tax refunds depends on how your tax was reported and how quickly HMRC gets the information it needs.
- Employees and pensioners (PAYE):
HMRC usually reviews PAYE records following the tax year ends in April. Refund letters or notifications often arrive between June and October if too much tax has been paid. If details from an employer or pension provider are late, this can push things back.
- Self-employed, company directors and landlords (Self Assessment):
Refunds are usually calculated once you’ve submitted a tax return. Any refund owed to you is typically issued within a few weeks if you file early. The closer you are to the filing deadline, the longer that process can take.
- Mixed income:
If you have more than one source of income it can get a bit more complicated — HMRC will need all the figures before they can confirm if there is any money due back.
If it’s well after October and you’re looking forward to a PAYE refund, or have filed a Self Assessment return and received nothing in response, we suggest checking your HMRC online account or getting in touch with the taxman for an update.
In many cases, HMRC will sort it automatically. If you’re paid through PAYE, they’ll usually spot the overpayment and send you a P800 explaining how to claim your refund.
But there are exceptions:
- If you’re self-employed or complete a Self Assessment tax return, you might need to request the refund yourself.
- Sometimes, HMRC holds the refund until you confirm your details online.
It’s a good idea to check your online tax account now and then, just to make sure everything’s up to date.
Sadly, scam messages pretending to be from HMRC are common — especially around refund time.
Here’s how to spot a fake:
- HMRC never sends refunds by text, WhatsApp, or email links.
- They’ll never ask for your card or bank details over message.
- Real letters come by post and direct you to your HMRC online account.
If you’re unsure, don’t click anything. Log in to your HMRC account directly (not through a link) and see if a refund shows there. You can also forward any suspicious emails to phishing@hmrc.gov.uk or texts to 60599.
When in doubt, always check before replying — it’s better to be safe than sorry.
