Tax Repayment Claims

Death and taxes are, as the old adage has it, the only two certainties. However, many people can bitterly attest that this certainty does not extend to the accuracy of the Inland Revenue’s calculations.

Every year thousands of people are overcharged in tax, and a huge proportion do not make any claim or appeal as the system appears oblique and difficult to understand. In reality, however, it is far from impossible to appeal against an apparent overpayment of tax.

Keeping Track of Tax

If you are an employee who pays tax using the PAYE (Pay As You Earn) system, it is perfectly possible that you would never have looked at the amount of tax that you have paid. As it is automatically deducted from your wage, Income Tax and National Insurance Contributions (NICs) may not be noticed when you pay them.

While this obviously means the tax system involves considerably less work for you, it can also lead to individuals losing track of how much they have paid. As a result, it is important that you are aware of the basic income tax bands. These, along with the rates at which you should be paying NICs, are covered in more detail in articles elsewhere on this site.

Understanding Your Tax Code

Before you lodge an appeal, you should always acquaint yourself with your Tax Code. This will be visible on your pay slips, and generally consists of a letter and around three numbers. The meaning of the code is dependant on whether the letter comes before or after the numbers.

If the number comes first, this number represents one tenth of the amount that you can earn before paying tax. The letter modifies your code in one of several ways: the most common is ‘L’, meaning that you are entitled to the basic Personal Allowance.

If, however, your code begins with a ‘K’, the number that follows it will represent one tenth of the amount by which you exceeded your non-taxable allowance, and therefore of the amount that must be added in order that you pay the right sum in tax.

Getting the Right Form

Having looked at your tax code, if you are still concerned that you have paid too much tax, you should then lodge a repayment claim. This is not as hard as you might imagine. The first step is to either contact your Tax Office, or visit the DirectGov website, where you will be able to download the relevant forms. In most instances you will require form R38a.

In some circumstances, however, other forms should be used; if, for example, you are making a claim for repayment of taxes paid on investment income, you will require form R40.

If, on the other hand, you have ceased to work during the current tax year, are not expected to return during the same tax year, and are not claiming Jobseeker’s Allowance, you will require the P50 Tax Claim form. It is very important that you do not use this form if you are still working.

Form R38a, the most common of the options available, is a fairly simple two-page form. The first page is essentially a space for a cover letter, so you can outline the problem yourself. The second page is used for giving your bank details in order that the repayment can be made. As can be seen, you should not be put off by any apparent complexities in the repayment system.