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.
In cases where recipients do not respond, HMRC sends a cheque to the registered address, but statistics reveal that tens of thousands of these cheques go uncashed annually.
Recent data, obtained via a Freedom of Information request by The i Paper, reveals that HMRC issued 1,746,720 cheques last year, of which 178,180 were never cashed, totaling £144 million in unclaimed refunds, equating to an average of £800 per taxpayer.
To streamline processes, HMRC aims to reduce the issuance of cheques in favor of digital communication with taxpayers.
Robert Salter, a partner at Blick Rothenberg, expressed concerns over HMRC’s continued reliance on cheques for tax refunds in many instances.
HMRC emphasized that the majority of PAYE repayments are now issued via bank transfers, the preferred secure and efficient method for customers to receive their refunds.
Tax codes consist of alphanumeric combinations indicating tax-free income entitlement for a tax year, with the most common code being 1257L for individuals with a single income source, allowing for £12,570 tax-free earnings annually.
Taxpayers can locate their tax code on payslips, P45 forms after job termination, or P60 forms at the end of a tax year, as well as online on GOV.UK.
Utilizing a free calculator provided by MoneySavingExpert.com can help individuals determine the accuracy of their tax code.
If individuals suspect overpayment of tax, they can request a refund by contacting HMRC via phone or the HMRC app, with the possibility to claim back up to four previous years of overpaid tax.
Even if overpayment extends beyond four years, individuals can still approach HMRC for potential refunds, especially in cases not caused by their actions.