We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Overpaid Salary and Overpaid Tax - Can't get the tax back

passenger_transport_enthusiast
edited 5 February at 1:02PM in Cutting tax
Hi, I'm in a bit of an unusual situation and I wondered what the tips are of the wise folk of MSE forums!

I worked for a company until May 2024. Unbeknownst to me, the firm continued to pay my salary until July 2024.

My new role paid to a different bank account had a k tax code, but I didn't think much of it because I was overpaying pensions.

The old firm noticed the overpayment and I apologised and sent the money back to them

However, although HMRC acknowledges my leaving date was 2nd May 2024, the "real time" data in their system shows I left July 2024. There are the "wages" paid between May and July in my online tax account. The employer say they've done their bit already.

What do I do to this computer says no problem? I'm due at least £3k in taxes and HMRC have given me a deadline of this tax year to sort it.

Do I sue the old company to get the money back? Even though a simple correction from their payroll should fix it...

Please help!
«1

Comments

  • Brie
    Brie Posts: 13,438 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    So you paid back more than you had received from the company?
    I’m a Forum Ambassador and I support the Forum Team on Debt Free Wannabe and Old Style Money Saving boards.  If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

    "Never retract, never explain, never apologise; get things done and let them howl.”  Nellie McClung
  • Brie said:
    So you paid back more than you had received from the company?
    I paid the company back the net salary I received after deductions.
    Say my wages were 4,000 gross, after taxes and pension etc that might leave 2,700 net.
    Over two months I paid back that total of approx. 7,000 net.
    But I paid tax on the gross income which meant I was temporarily pushed into a higher tax bracket. Meaning I paid taxes on a salary of 80,000 k gross when I actually earned approx. 65,000 k gross.
  • Grumpy_chap
    Grumpy_chap Posts: 16,976 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    I think this might be better in the Cutting Tax area of the forum.  Anyway, it *should* sort itself out and the "deadline of this tax year to sort it" is false.  At the worst case, the OP will have paid to much tax and will be able to claim it back subsequently.

    If I understand correctly:
    • OP worked for "A" until end of May.
    • OP began working at "B" from start of June.
    • "A" paid OP as usual in May.
    • "A" did not process OP as a leaver at the correct time, but instead paid OP for June and July.
    • OP received circa £8k excess pay (£4k per month for two months) and, as a result, OP suffered income tax of around £3k (£1.5k per month for two months)
    • "A" noticed and requested OP pay back the overpayment, which the OP has done.
    • "A" should now run a negative payroll (for which the OP should receive a payslip) and issue the OP with a P45.  
    • The correct P45 will then report to HMRC who will issue a revised tax code.  
    • Assuming the revised tax code is on a cumulative basis, that will update the tax deducted from the OP's salary at "B" for the February and March payroll and will mean the OP pays less income tax for a couple of months (or even receives a tax credit via payroll).  
    • If the revised tax code is on a non-cumulative / month 1 basis, the overpaid tax may not correct until either incorporated into tax code for 2025 - 26 or may require an application for repayment (I assume the OP does not prepare SA tax return).
    The income tax is relatively easy and will resolve itself.

    The more complex matter might be NI that has been paid (and usually cannot be recovered) plus any matters relating to pension or other benefits.  We'd need more information to comment here.  As this seems to be the error of "A", then "A" should make good the OP from any losses.  Matters relating to pension may not actually be a loss if pension contributions have been made and cannot be unwound, the OP still has that pension fund increased for the future (perhaps even with the "A" employer's contribution also).
  • I think this might be better in the Cutting Tax area of the forum.  Anyway, it *should* sort itself out and the "deadline of this tax year to sort it" is false.  At the worst case, the OP will have paid to much tax and will be able to claim it back subsequently.

    If I understand correctly:
    • OP worked for "A" until end of May.
    • OP began working at "B" from start of June.
    • "A" paid OP as usual in May.
    • "A" did not process OP as a leaver at the correct time, but instead paid OP for June and July.
    • OP received circa £8k excess pay (£4k per month for two months) and, as a result, OP suffered income tax of around £3k (£1.5k per month for two months)
    • "A" noticed and requested OP pay back the overpayment, which the OP has done.
    • "A" should now run a negative payroll (for which the OP should receive a payslip) and issue the OP with a P45.  
    • The correct P45 will then report to HMRC who will issue a revised tax code.  
    • Assuming the revised tax code is on a cumulative basis, that will update the tax deducted from the OP's salary at "B" for the February and March payroll and will mean the OP pays less income tax for a couple of months (or even receives a tax credit via payroll).  
    • If the revised tax code is on a non-cumulative / month 1 basis, the overpaid tax may not correct until either incorporated into tax code for 2025 - 26 or may require an application for repayment (I assume the OP does not prepare SA tax return).
    The income tax is relatively easy and will resolve itself.

    The more complex matter might be NI that has been paid (and usually cannot be recovered) plus any matters relating to pension or other benefits.  We'd need more information to comment here.  As this seems to be the error of "A", then "A" should make good the OP from any losses.  Matters relating to pension may not actually be a loss if pension contributions have been made and cannot be unwound, the OP still has that pension fund increased for the future (perhaps even with the "A" employer's contribution also).
    Hi, thank you for your response - you've mentioned this perfectly.

    As for it "sorting itself out" - the company A should have told HMRC their "real time information" - it is now February 2025, so nine months since I left. HMRC bases their taxes off this "real time information".

    Not to mention national insurance. I believe the pension was removed too from what I saw.

    HMRC insist it doesn't resolve itself - a transaction from the company A has to go in to HMRC to show I repaid them c. £7.5k, equivalent to £13k gross, therefore £3-4k in taxes needing to be repaid.
  • Grumpy_chap
    Grumpy_chap Posts: 16,976 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker

    HMRC insist it doesn't resolve itself - a transaction from the company A has to go in to HMRC to show I repaid them c. £7.5k, equivalent to £13k gross, therefore £3-4k in taxes needing to be repaid.
    Yes, I hope I did not confuse by saying it would resolve itself.  It does require "A" to submit the correct documentation to kick start that self-resolving mechanism.

    For the current tax year (2024 - 2025), if I understand correctly, "A" have paid you as follows:
    • April 2024 = £4k pay less £1.5k income tax
    • May 2024 = £4k pay less £1.5k income tax.  Total to date £8k (£3k income tax).
    • June 2024 = £4k pay less £1.5k income tax.  Total to date £12k (4.5k income tax).
    • July 2024 = £4k pay less £1.5k income tax.  Total to date £16k (£6k income tax).
    • OP repaid "A" the two-months overpayment £8k pay less £3k income tax so £5k repaid.
    • The OP will not receive the overpaid income tax back unless "A" process the repayment via payroll.
    • "A" need to provide the OP with a payslip (presumably for February now) showing minus £8k pay with minus £3k income tax.
    • "A" needs to process OP leaving the company and issue P45.

    Once that is correctly processed, the HMRC processes will be kick-started and the tax correction will follow.

    It really is worth the OP contacting a senior person within payroll at "A" as it seems as though the pay-roll administrators who have dealt with this have not understood the implications of the incorrect (additional) payroll being processed and the fact that now needs to be formally processed back out.
    There is strong interest for the OP and "A" to get this sorted within the February payroll, as this is the last chance for the correction to be processed and allow tax remedy to work within this tax year.  If it is not done, it also gets more difficult for "A" as they'll need to process a P60 at the end of March and then process the reversal via payroll (which then lands in the incorrect tax year so may result in variance in values to be refunded) and still need to prepare the P45.
    Who is the OP dealing with at "A"?
    This needs escalating within "A".  Can the OP contact the appropriate person to get this properly resolved?

    With the two employments being seen by HMRC as existing concurrently, HMRC have correctly provided a tax code to the new employer on the basis of job "A" paying £48k (£4k x 12) plus job B paying a salary, presumably of similar magnitude.  

    The above is all limited to comment on income tax. 
    Pension may also have been incorrectly processed, but possibly not an issue if the OP can tolerate that and have a slightly enhanced retirement in return.
    Tax and payments around any benefits at "A" (company car, healthcare) will also need to be remedied.
    Plus NI, which I don't think can be refunded so "A" should reimburse to the OP and suffer the penalty as it was the error of "A" that led to this position.  
    Hopefully there are others in the forum that can comment as to how these elements get resolved.  I am sure there must be members of the forum with experience of processing pay-roll and, no doubt, this is not the first time this error will have arisen.  There must be a process, even if poorly known.


    Finally, can the OP confirm how much they repaid to the employer "A"?
    I initially understood they received two months at £4k each month less £1.5k each month income tax, so £2.5k per month nett, £5k total nett.  Accordingly, the OP's repayment would have been £5k back to "A".
    The OP's latest post indicates they repaid "A" the full £8k gross salary (£4k per month for 2 months).  That means the OP is currently at a nett loss of around £2.5k...
  • chrisbur
    chrisbur Posts: 4,196 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    The employer might find the following link helpful....
    https://www.gov.uk/payroll-errors/correcting-your-fps-or-eps

    As well as tax there are details on correcting date of leaving, NI, Pension and student loan.

  • Penguin_
    Penguin_ Posts: 1,466 Forumite
    Fifth Anniversary 1,000 Posts Name Dropper
    They need to roll back the payroll for you (& you alone) to your final month, enter the correct record then send an FPS adjustment to HMRC. This will then send the correct data to HMRC & finish you in the correct month. It's a relatively simple process truth be told.
  • Nomunnofun1
    Nomunnofun1 Posts: 268 Forumite
    100 Posts Name Dropper
    Penguin_ said:
    They need to roll back the payroll for you (& you alone) to your final month, enter the correct record then send an FPS adjustment to HMRC. This will then send the correct data to HMRC & finish you in the correct month. It's a relatively simple process truth be told.
    It is indeed although it will be somewhat messier if not rectified before the end of the tax year!
  • sheramber
    sheramber Posts: 20,914 Forumite
    Tenth Anniversary 10,000 Posts I've been Money Tipped! Name Dropper
    I read it as the OP squared things with the employer. 

    In his example, he earned £4000 gross and paid ta x of £1.5K.

    He repaid the NET amount so he got £2.5k and repaid £2.5k

    But the employer books showed a deduction of £4k less than£2.5k repaid.

    It is the employer who is due the tax deducted back, not the OP. 

    Employer pays out 4k.  
     oP 4k   £2.5k to OP.  1.5k to HMRC

    OP not due money so employer due 4k back

    OP paid back 2.5k  so employer now missing the 1.5k tax,sent to HMRC 

    BUT

    OP then states he paid back £7.5k , which is not the net figure.  Of ( 4k less 1.5k) x2.
  • Grumpy_chap
    Grumpy_chap Posts: 16,976 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    sheramber said:
    I read it as the OP squared things with the employer. 

    In his example, he earned £4000 gross and paid ta x of £1.5K.

    He repaid the NET amount so he got £2.5k and repaid £2.5k

    But the employer books showed a deduction of £4k less than£2.5k repaid.

    It is the employer who is due the tax deducted back, not the OP. 

    Employer pays out 4k.  
     oP 4k   £2.5k to OP.  1.5k to HMRC

    OP not due money so employer due 4k back

    OP paid back 2.5k  so employer now missing the 1.5k tax,sent to HMRC 

    BUT

    OP then states he paid back £7.5k , which is not the net figure.  Of ( 4k less 1.5k) x2.
    Ignoring the last sentence which is an apparent anomaly from the rest of the thread, I don't read things in the same way as you.

    The OP received £4k gross, so £2.5k nett plus £1.5k income tax.  This happened twice
    The OP repaid the employer the £2.5k, but is still showing as having earned £4k so no tax will be refunded by HMRC.
    The tax refund will go back to employer, but needs to be have the earnings journalled out from the OP's HMRC account otherwise earnings at the end of the year will show the OP as having earned £4k (twice) more than the OP actually earned so the OP's income tax liability will be incorrect.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.