So, you think you’re paying too much tax through PAYE?

Paying too much tax

So, you think you’re paying too much tax through PAYE?

Paying our taxes means we contribute to keeping our institutions and infrastructure running. The money we pay in income tax and National Insurance contributions goes towards funding vital services like the NHS, the police, education, the welfare system, and public projects like roads, rail, and housing. Everyone should pay their fair share. But what happens when you think you might be going above and beyond without meaning to?


You might find, at the end of each pay period, you take a glance at your paycheck and see a strangely high tax contribution. If it’s your first job, noticing overpayment might be more difficult, because you don’t know what to compare it to. But you can find out if you are paying the right amount of tax by:

  • Checking your tax code – Depending on where you work and how much you earn, you’ll receive a tax code which you’ll find on your paycheck. Research the meaning of your tax code and compare the results to your current situation. The most common tax code in 2019/20 is 1250L. It’s used for people with only one job, a £12,500 tax-free allowance, no unpaid tax, and no taxable benefits.
  • Contacting HMRC – HMRC can tell you how much tax you’ve been paying, why they assigned you a certain tax code, and they can also deal with your request for a refund by sending your employer a new tax code.
  • Do the calculations yourself – Find out your annual salary, and work out how much you think you should pay in tax according to your circumstances.

Why might you overpay tax?

There are many reasons HMRC might give you the wrong tax code. For example:

  • You didn’t receive a P45 from your previous place of employment – HMRC might think you have more than one job.
  • You have an emergency tax code – HMRC assigns emergency tax codes when they don’t have enough information to assign the correct one. If you see an M1 or W1 at the end of your tax code, your employer calculates tax each pay period as opposed to what annually, often causing overpayments. 0T tax codes also mean your employer didn’t have enough information to give you the right one, but usually HMRC charges tax at a higher rate than with M1/W1.
  • You’re in full-time education – If you’re in full-time education, you don’t have to pay income tax but you may still be liable to pay NIC if you’re over the threshold. Make sure your employers are aware so you don’t get overtaxed as a student.

There are other possibilities that could cause tax overpayments. If you think you’re contributing too much tax, the problem is easy to solve. Contact HMRC by phone or online and they can send you a P800 detailing any tax refunds you’re due, helping you get your money back as soon as possible.

Big Hand has experience in managing the accounts of clients from limited companies to sole traders. With our industry expertise, we’ll notice any problems with your PAYE or self-assessment before they have the chance to cause trouble. For more information, get in touch with us today on 0161 327 2911.

About the Author:

Since 2013, Sophie has been an integral part of the Big Hand team. As a social butterfly, Sophie is mostly responsible for introducing new clients to the company. If you’re an avid networking, you’re most likely to meet Sophie at local events. Alongside attracting new business, she also assists with account management, and she manages payroll on behalf of clients. For fun, Sophie loves to keep fit running or playing korfball with her team. She is also in the middle of learning a new language and so her most recent challenge is attempting to read Harry Potter in Dutch.