Around 460,000 people chased HM Revenue & Customs for refunds on overpaid income tax in the year 2018/19, according to an FOI by Royal London, the mutual insurer.
Royal London is urging taxpayers to double check whether they may have overpaid tax.
Some of the reasons HMRC gives for overcharging people income tax are that someone has changed jobs in the year or is subject to changes to taxable benefits, which might result in an overpayment of tax.
Becky O’Connor, personal finance specialist at Royal London, said: “Nearly half a million people tried to get overpaid income tax back from HMRC in the last tax year. This goes to show it’s a good idea not to assume the taxman is always right about what he says you owe. Always check your tax statement for the year and keep a note of any unusual changes to your income that might mean you have overpaid.
Tax on interest on PPI payouts
Another reason to apply for a refund could be tax paid on interest received as part of Payment Protection Insurance (PPI) compensation payouts. PPI payments include annual interest of 8 per cent to compensate claimants for the years when they were out of pocket as a result of being mis-sold a PPI policy.
Non-taxpayers and those who have received interest within their personal tax allowance (see notes to editors) for the year could be eligible to reclaim tax paid on PPI interest, if they have received a payout.
For instance, a total payout of £3,000 for a PPI policy that was taken out five years ago would have had £180 approx (note 3. to editors). tax paid directly to HMRC, which could be reclaimed.
Ms O’Connor said: “If you have received a payout for PPI compensation, it is worth checking the statement for details of any tax paid on the interest element of your refund. If it was and tax was not due because the interest income was within your personal allowance or you are a non-taxpayer, you may be entitled to request a refund.”
Rules on claiming back overpaid income tax
Anyone who thinks they may have overpaid income tax on savings and investments can fill in the “R40” form, on the HMRC website. You can claim a refund for up to four previous tax years in most circumstances.
Some circumstances in which you might apply for a refund of tax overpaid:
- pay from your 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
- UK income if you live abroad
The value of all types of repayments in 2018/19 was just over £7bn (see notes to editors).
For further information please contact:
Becky O’Connor, Personal Finance Specialist
- Email: Rebecca.O'Connor@royallondon.com
- Tel: 0203 2725 434
- Mob: 07967 613925
About Royal London:
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.