No one wants to pay too much tax, and yet far too many people are still doing it. Some of them got stuck with emergency tax codes from HMRC when they changed jobs. Others only worked for part of the year. Whether you've overpaid through your wages or your pension, you're still out of pocket.

How Could I Have Paid Tax I Don't Owe?

If you're working PAYE, there are quite a few ways you could get stuck paying tax you don't owe.

Things can get tangled because you had more than one job, for example. If you cut back from full-time to part-time work during a tax year, it can throw the calculations off. HMRC will still have been taking their bite based on your full-time wages, which can be painful. Students who work during holidays can get caught out the same way.

Basically, under PAYE, the taxman assumes that the money you've got coming in is the same all year round.

Like anything else, the tax system only works as well as the people running it. Suppose your employer makes a mistake and uses the wrong tax code for you. You might not even notice for months or more - by which time you could have already lost a major chunk of cash.

Pension providers have been known to blow it, too. Whatever kind of PAYE income you're getting, having the wrong tax code can be messy and expensive. If you've got more than one pension, it can be even trickier to notice that things are going wrong. There are also rules around self assessment tax returns and pensions that are worth knowing.

How Do I Get Tax Back If I Have Overpaid?

Sometimes, if you're lucky, the taxman spots the problem and tries to fix it for you. When that happens, you'll get a P800 tax calculation (find out more about p800s and how to use them on HMRC's website) saying what they think you should have paid.

Of course, they're getting their information from your employer or pension provider. If that's where the problem started, HMRC might just grab the wrong end of the stick and hit you with it! If the P800 says you've paid too much, they'll refund it automatically. If it says you've paid too little, then the surprises get nastier.

Convincing the taxman to cough up overpaid tax takes legwork and persistence. You need to:

  • provide a lot of evidence, and to be absolutely sure of your calculations.
  • keep track of everyone you've spoken to at HMRC, and what they said.

There's a lot of paperwork to juggle, and plenty of ways to trip up. Taking money from the taxman isn't meant to be easy, and that fact alone puts many people off.

The main thing to understand is that HMRC won't always get it right. If you realise you've paid too much and the taxman doesn't seem to know, it's time to make some noise about it.