Background
After the end of the tax year, HM Revenue & Customs (HMRC) checks to see if an employee has paid the correct amount of tax under pay as you earn (PAYE). Where an employee has paid too much tax, HMRC will write to them and inform them that a repayment is due. This process is currently being undertaken for the 2023/24 tax year.
However, unlike in previous years HMRC will no longer automatically issue a cheque where an employee is due a repayment under PAYE. Instead, the employee will need to take action to claim the repayment.
Detail
For those individuals who pay tax through the PAYE system HMRC is changing the way it repays the majority of employees who are eligible to claim their repayment online. As part of the move towards online usage and to reduce potential fraud, HMRC has withdrawn the automatic refund of PAYE overpayments by cheque.
Where an employee has paid too much tax through PAYE, perhaps because they had been put on the wrong tax code, HMRC will write to them informing them that a repayment is due. These tax calculation letters, known as a P800, would include details of the overpayment. Generally, letters are sent out between June and November after the end of the tax year. Previously, where an employee received one of these letters and if they did not claim the repayment online within 21 days, then HMRC would automatically issue a cheque through the post.
However, since 31 May 2024, HMRC has stopped issuing cheques automatically. Instead, the employee will need to claim their repayment (online) and details are available at tax overpayments and underpayments. The tax calculation letter also includes instructions on how to claim the repayment and the alternative process for those that cannot claim online. The employee can request a cheque through this process if required, but it could take up to 6 weeks for the cheque to be sent.
Employees will need their P800 tax calculation letter to make their repayment claim as the reference number from the letter is required to submit a claim as well as a national insurance number.
It is also possible for employees to claim a refund through their personal tax account, the HMRC app or by contacting HMRC and asking them to send a cheque. HMRC has stressed that there will still be non-digital routes for taxpayers who cannot use online services so that they are able to claim their repayments.
If you would like more information on the points raised above, or are concerned you may have overpaid tax through the PAYE system, please speak to our Tax Director, Jenny Marks.
For those taxpayers within self assessment it should be remembered that if payments on account are due for the 2023/24 tax year then the second payment will payable by 31 July 2024 in order to avoid any late payment interest, currently chargeable at 7.75%.
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