Households could be owed hundreds or even thousands of pounds in overpaid tax, with married couples, workers and people accessing their pensions among those being encouraged to check.
From an overlooked marriage tax break to emergency tax applied to pension withdrawals, taxpayers may be able to reclaim money where too much tax has been deducted.
Andy Wood, tax barrister and founder of Tax Barrister UK, has identified three areas households may wish to examine.
Marriage Allowance could be worth more than £1,000
Marriage Allowance lets an eligible person transfer £1,260 of their Personal Allowance to their husband, wife or civil partner.
This could reduce the receiving partner’s Income Tax bill by up to £252 during the current tax year. Eligible couples may also be able to backdate a claim for up to four previous tax years, potentially taking its total value beyond £1,000.
Andy said: “Marriage Allowance is relatively straightforward, but it can easily be overlooked because couples must actively make a claim.
“It will not apply to every married couple. Broadly, one partner will usually need to have income below the Personal Allowance while the other pays Income Tax at the basic rate.
“If a couple has been eligible for several years but has never claimed, the ability to backdate the application could make the refund considerably more valuable.
“Applications can be made directly through GOV.UK without paying a claims company, although eligibility should always be checked carefully.”
Further eligibility information is available through the Government’s Marriage Allowance guidance.
Emergency pension tax refunds could be worth thousands
People who access a pension flexibly can sometimes have too much tax deducted because their initial withdrawal is processed using an emergency tax code.
Recent figures reported by The Sun suggest HMRC returned more than £50 million to approximately 12,500 pension savers between April and June, equating to almost £4,000 per claimant on average.
Andy explained: “When somebody makes their first flexible pension withdrawal, the provider may have to apply an emergency tax code on a month-one basis.
“This effectively treats that single withdrawal as though the same amount will be received every month for the remainder of the tax year. As a result, the initial deduction can be significantly higher than the person’s eventual tax liability.
“An emergency deduction does not necessarily mean HMRC has made an error, and it does not automatically mean the entire amount deducted is refundable. The correct position depends on the individual’s total taxable income for the year.
“Where too much has been taken, people may be able to reclaim it during the tax year rather than waiting for HMRC to reconcile their records later.”
The appropriate form depends on how the pension was accessed. These may include:
- P55 if only part of the pension pot was withdrawn
- P53Z if the whole pot was withdrawn and the person has other taxable income
- P50Z if the whole pot was withdrawn and the person has stopped working
HMRC provides separate guidance on reclaiming tax after flexibly accessing a pension.
Workers could claim tax relief on eligible employment expenses
Employees who personally pay for certain costs required for their jobs may be able to claim tax relief if their employer has not reimbursed them.
Potentially eligible expenses can include maintaining or replacing specialist work clothing, professional subscriptions, tools and some business travel costs.
Andy said: “Employees sometimes assume that their tax position is automatically correct because Income Tax is deducted through PAYE. However, HMRC will not necessarily know about eligible costs that a worker has paid personally.
“Tax relief does not usually mean receiving the full cost of an item back. It generally reduces the amount of taxable income by the value of the qualifying expense, so the benefit depends on the person’s tax rate.
“There are also strict rules around what qualifies. Ordinary clothing and the cost of commuting between home and a permanent workplace will not normally be allowable simply because they are connected to someone’s job.
“Claims can generally be made for the current tax year and the previous four tax years, so keeping receipts and accurate records could be important.”
Employees can check which costs qualify using HMRC’s employment expenses guidance.
Andy added: “Taxpayers should not assume that a refund will be issued automatically. Checking your tax code, PAYE record, and previous deductions could reveal that too much tax has been paid.
“At the same time, people should be cautious of firms promising large or guaranteed refunds. A claim should be accurate, supported by evidence, and submitted through the appropriate HMRC process.
“Any refund will depend on the taxpayer’s individual circumstances, and making a speculative claim could create further problems if the information provided is incorrect.”
Leave a Comment