Thousands of individuals have failed to claim tax refunds from HMRC averaging £800, according to recent data.
Various factors can lead to overpaid income tax, with the most common being an incorrect tax code assignment.
HMRC typically notifies individuals of overpaid tax through a P800 tax calculation letter, providing instructions on how to request a refund.
If no response is received, HMRC issues a cheque to the registered address, but statistics reveal that tens of thousands of these cheques go uncashed annually.
Recent information obtained via a Freedom of Information request by The i Paper shows that HMRC distributed 1,746,720 cheques last year, of which 178,180 were never encashed, amounting to a total of £144 million – equating to an average of £800 per taxpayer.
HMRC has been striving to minimize cheque issuance by opting for digital communication methods with taxpayers.
Robert Salter, a partner at Blick Rothenberg, expressed concerns about HMRC’s continued reliance on cheques for tax refunds in many cases.
An HMRC spokesperson emphasized that the majority of PAYE repayments are now processed through bank transfers, the preferred and expedited method for customers to receive their refunds securely.
Tax codes, composed of alphanumeric characters, dictate the tax-free income allowance for a tax year to employers or pension providers.
The common tax code 1257L, applicable to single income sources, permits individuals to earn £12,570 tax-free annually, aligning with the standard personal allowance.
Taxpayers can locate their tax code on their payslip, a P45 after leaving employment, or a P60 at the tax year’s end, as well as online at GOV.UK.
For a rough assessment of tax code accuracy, MoneySavingExpert.com offers a free calculator to help individuals determine if their tax code is correct.
Individuals who suspect overpaid tax can initiate a refund claim by contacting HMRC at 0300 200 3300 or through the HMRC app.
Refunds can be requested for up to four previous tax years, and even if overpayments extend beyond this period, individuals can still inquire about a refund from HMRC.
