Glossary · UK
What is Tax Rebate?
A refund of Income Tax that HMRC returns when someone has paid more tax than they actually owed, often due to an incorrect tax code, a mid-year job change, or unclaimed reliefs.
Full Definition
A tax rebate (or tax refund) is money HMRC repays when it determines that too much Income Tax has been deducted, most commonly through PAYE. Common causes include being placed on an emergency tax code when starting a new job, having only worked part of the tax year, having multiple jobs where the Personal Allowance was not split correctly between employers, overpaying through the Marriage Allowance not being claimed, or having deductible employment expenses such as professional subscriptions, uniform costs or business mileage under the Approved Mileage Allowance Payment rates that were never claimed. Some rebates are issued automatically after HMRC reconciles PAYE records at the end of the tax year, often via a P800 tax calculation letter, while others need to be actively claimed, for example by contacting HMRC directly, submitting a Self Assessment return, or using form P87 for employment expenses. UK taxpayers can generally only claim a refund for the current tax year plus the four previous tax years. Rebates can also arise outside PAYE, such as overpaid Stamp Duty Land Tax surcharge refunds when a previous main residence is sold within three years of buying a new one, or overpaid Capital Gains Tax. Genuine rebate claims made directly through HMRC (gov.uk or the HMRC app) are free; a number of third-party tax rebate companies charge a percentage commission (sometimes 30-50%) for filing claims on a taxpayer's behalf, so it is worth checking eligibility directly with HMRC first.