HMRC discuss rules on hourly pay and back pay
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HMRC helps millions of Britons deal with their tax affairs, but one important part of its work is tax refunds. Each year, individuals keep an eye out for tax refunds as it means they get money back rather than paying it out. As no one wants to overpay tax, these refunds – or rebates – are of particular importance. Those who receive an income from employment and pay tax through the Pay As You Earn (PAYE) system could sometimes pay too much, or indeed, too little in tax for a variety of reasons. This could happen, for example, if someone received a pay rise that HMRC was unaware of, and did not have their tax code updated. A tax code is important in this sense, as those who are employed, or who are in receipt of a pension will have one. It is used by their employer or pension provider in order to work out how much tax needs to be taken from the individual concerned.
If a tax payment is incorrect, for example, if someone has paid too much tax, then HMRC will send the person what is known as a P800, or alternatively a Simple Assessment tax calculation. This tells individuals how to get a tax refund, or to pay the tax they owe to the Revenue.
P800s are sent out after the tax year ends on April 5, but many people regularly receive this kind of correspondence in September, meaning Britons will want to look out for theirs arriving soon. These are all usually processed by the end of November.
HMRC will usually send out letters to those who are impacted by a tax refund to inform them of the potential for a windfall after the tax year has finished.
There are certain instances where a person might receive a P800 form, for example, if they started receiving a pension at work. Britons can also get the form if they finished one job, started a new one, and were paid by both employers within the same month.
HMRC tax refunds are due from this month – how to check if you are entitled to one (Image: Getty)
A Simple Assessment letter, however, is issued to individuals in a number of circumstances. This could include if someone owes HMRC more than £3,000, or owes tax which cannot be automatically taken out of their income. It is also applicable to those who are required to pay tax on the state pension.
The letter Britons receive from HMRC will show the income they should have paid tax on. This, the Government states, will include any income from pay, pensions, state pensions, savings interest and employee benefits.
Individuals are encouraged to compare the figures with their own records, for example, their P60, bank statements or letters from the Department for Work and Pensions (DWP). And some may be able to use the HMRC tax checker tool online to work out how much tax they should have paid.
The Government also has a dedicated service to help people see if they can claim a tax refund. It is available through the Government website and involves a number of tick-box questions to help ascertain how much a person may be entitled to.
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People may be able to get a tax refund if they have paid too much tax, the Government has confirmed, and the service can be used to see how to claim if a person has paid too much on:
- Pay from their current or previous job
- Pension payments
- Income from a life or pension annuity
- A redundancy payment
- A Self Assessment tax return
- Interest from savings or PPI
- Foreign income
- UK income if you live abroad
- Fuel costs or work clothing for a job
If a P800 says someone is due a refund, then it should also explain how a person can get their hands on it. It will state whether this refund can be claimed online – likely to be the fastest and most efficient way to action the rebate.
Individuals can expect to receive the money within five working days of making the claim for a tax refund, and it will be in their UK account once the bank has processed the payment. If it is not claimed within 21 days, the HMRC will send people a cheque. And this will be received within six weeks of the date stated on the P800.
Alternatively, a P800 could tell individuals they are set to get a cheque from HMRC. In this case, they will not need to make a claim for a tax refund. The cheque will be issued within 14 days of the date stated on the P800. If someone is owed tax from more than one year, then they can expect a single cheque for the entire amount.
HMRC: Some people may have overpaid tax (Image: Getty)
A person is also able to check how much Income Tax they should have paid. If they believe they have paid too much tax, then they are encouraged to reach out to HMRC. If the Revenue agrees, they will then issue the person a P800.
However, a P800 may not always be good news if it lands through the letterbox. It could signal a person actually owes tax, and therefore has to take action to meet this bill by repaying HMRC.
HMRC will usually collect the tax a person owes in instalments over the next year, and this will happen automatically if an individual:
- Pays Income Tax through an employer or pension provider
- Earns enough income over their Personal Allowance to cover the underpayment
- Owes less than £3,000
If the money cannot be collected in this way, then HMRC will write to the person to let them know about how they can pay. This can be done in a number of ways, including online or by post, for example.
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If paying by post, this can be done through a cheque made payable to ‘HM Revenue and Customs only’. Individuals should write their National Insurance number on the back of the cheque, and sent it with a covering letter including:
- Full name and address
- National Insurance number
- The amount of the payment
- What the payment relates to, for example, PAYE
- The year the payment is for
Individuals, however, have also been warned about scam correspondence which is likely to arise surrounding tax refunds at this time of year.
In previous instances, fraudsters have attempted to target unsuspecting Britons through emails and texts falsely claiming people could be entitled to receive a significant sum back through a rebate.
Scams of this kind attempt to steal the personal and sensitive data of people right across the country. In this case, the Government has warned HMRC only informs Britons about tax refunds through the post, or through pay via an employer.