Understanding Tax Claims in the UK: Maximising Your HMRC Entitlements

Tax claims are a crucial yet often misunderstood area of UK taxation. For taxpayers, businesses, landlords, and the self-employed, correctly navigating tax claims can result in significant refunds, reduced liabilities, or simply ensuring compliance with HMRC requirements. Over two decades advising clients across the UK, I have seen frequent mistakes that cost individuals and companies thousands in overpaid tax, often because claims were overlooked, misfiled, or misunderstood. This guide provides a comprehensive, practical look at tax claims—how they work, who is eligible, and how to manage them effectively.

What a Tax Claim Is and Why It Matters

A tax claim is a formal request to HMRC to adjust your tax position, usually resulting in a refund or a reduction in tax liability. Claims can arise from overpaid income tax, allowable expenses, reliefs, or incorrect coding on PAYE (Pay as You Earn). Unlike standard filings, claims are often triggered by changes in personal circumstances, income fluctuations, or missed deductions.

For example, many employees discover after the tax year that they have been overtaxed because they changed jobs mid-year, had fluctuating bonuses, or were paying too much National Insurance. Submitting a timely claim can recover these overpayments, often automatically once the correct calculation is made.

Types of Tax Claims

Tax claims in the UK span multiple areas:

1. Income Tax Claims

• Overpayment due to PAYE errors
• Marriage Allowance transfer (up to £1,260 in 2025/26)
• Blind Person’s Allowance
• Claiming relief for work-related expenses not reimbursed by your employer

• Late claim for allowable expenses
• Capital allowances for small businesses
• Pension contributions outside of standard relief claims

• Loss relief carried forward or back
• Overpayment due to misreported gains
• Entrepreneur’s Relief (now Business Asset Disposal Relief) claims

• Refunds for VAT overpaid on purchases
• Partial exemption adjustments for businesses
• Flat rate scheme corrections

• Childcare Vouchers and Tax-Free Childcare
• Employment Allowance for employers
• Gift Aid contributions

How HMRC Handles Tax Claims

Claims are often processed automatically if submitted via PAYE coding adjustments or online self-assessment returns. However, manual claims may require:

• Written applications (e.g., form R40 for tax repayment on savings interest)
• Evidence of overpayment or qualifying expenditure
• Accurate calculation of reliefs or allowances

HMRC generally allows claims within four years of the end of the relevant tax year for income tax, and three years for VAT. This window is critical; late claims often require exceptional reasoning and supporting documentation.

Common Scenarios in Practice

Let’s examine some real-world examples:

• Scenario 1: Employee Overpayment
  Sarah changed employers in November 2024. Her PAYE coding didn’t account for her new personal allowance. By submitting a claim using form P50, she recovered over £600. HMRC processed the claim within six weeks.
• Scenario 2: Self-Employed Expenses
  John, a freelance designer, forgot to include £3,000 of home office expenses on his 2023/24 self-assessment. Amending the return allowed a tax saving of approximately £660, effectively reducing his liability by 20%.
• Scenario 3: Pension Contributions
  Maria contributed £8,000 to her personal pension in 2024/25. She had already received basic-rate relief via her provider but was a higher-rate taxpayer. Claiming the additional 20% higher-rate relief via her self-assessment returned over £1,600 to her.

Step-by-Step Process for Filing a Claim

1. Identify Overpayment or Eligible Relief
   Review pay slips, P60s, P45s, and bank statements to identify areas where tax has been overpaid or where relief is available.
2. Check HMRC Rules and Deadlines
   Verify the relevant tax year, allowable claims, and required forms. PAYE adjustments can often be requested via a personal tax account.
3. Prepare Supporting Evidence

• Receipts for work expenses
• Pension contribution statements
• Proof of donations for Gift Aid

Allowable Expenses and Reliefs Frequently Missed

Many taxpayers fail to claim allowable expenses or reliefs due to a misunderstanding of HMRC rules. Some examples include:

Tax Code Adjustments and Refund Claims

PAYE tax codes are HMRC’s method to adjust for allowances and deductions during the year. Incorrect codes can lead to overpayment. Adjusting your code mid-year can:

• Prevent further overpayment
• Trigger automatic refund if already overpaid

Real-Life Insight

Many clients underestimate small overpayments, but aggregated over multiple income streams, this can reach thousands of pounds. For example, an employee with side income, charity Gift Aid contributions, and home office expenses might unknowingly have overpaid £1,200–£1,500. Claiming this is straightforward but requires detailed record-keeping.

Next Steps for UK Taxpayers

To ensure maximum tax efficiency:

• Maintain accurate records of income and expenses
• Review tax codes annually
• Use HMRC personal tax account for online claims
• Seek professional advice for complex scenarios (self-employment, capital gains, foreign income)

Being proactive with tax claims is not only financially beneficial but also reduces the risk of HMRC investigations or missed entitlements. In Part 2, we will delve into more advanced claims, including reliefs for landlords, entrepreneurs, and investment-focused taxpayers, alongside detailed examples and calculations that can make a tangible difference to your tax position.

Advanced Tax Claims for UK Taxpayers

Once basic claims like PAYE refunds or simple work expenses are accounted for, many taxpayers can benefit from more advanced claims. These often involve businesses, landlords, and investors where the rules are more complex, thresholds vary annually, and documentation requirements are more stringent. Understanding these claims can yield significant savings, especially when handled proactively.

Claims for Self-Employed and Small Business Owners

Self-employed individuals frequently overlook allowable expenses and reliefs, partly due to the breadth of what HMRC considers legitimate deductions. Commonly missed items include:

• Business-use-of-home expenses:
  Claiming a proportion of utility bills, council tax, mortgage interest, and internet costs. HMRC provides a simplified flat-rate method, but many claim precise calculations based on actual usage, which can increase deductions.
• Capital Allowances:
  Equipment, machinery, and vehicles used for business purposes may qualify. For example, a £5,000 laptop for business use could allow a £5,000 deduction from profits in the year of purchase. The Annual Investment Allowance (AIA) in 2025/26 remains £1,000,000 for qualifying assets.
• Professional Fees and Subscriptions:
  Membership fees to recognised professional bodies are fully allowable, but only if they are relevant to the trade. HMRC scrutiny increases where memberships are for general interest rather than directly linked to business activity.
• Trading Losses Relief:
  Self-employed losses can be offset against past profits or carried forward. Many taxpayers fail to claim relief for losses in previous years, missing the opportunity to reduce tax liabilities significantly. For instance, a £10,000 trading loss in 2023/24 could offset £10,000 of prior-year income, saving up to £4,200 in tax at a 42% higher-rate bracket.

Landlord-Specific Tax Claims

For landlords, tax claims often relate to allowable expenses and reliefs against rental income:

• Mortgage Interest and Finance Costs:
  Only finance costs related to residential property qualify. Note that since 2020, tax relief on finance costs is limited to the basic rate (20%) rather than full deduction against rental income, which can affect higher-rate taxpayers.
• Maintenance and Repairs:
  Day-to-day repairs, such as fixing a boiler or repainting, are allowable, while improvements (like an extension) are capital and claimed via capital gains or depreciation on replacement.
• Wear and Tear Replacement Allowance:
  This has been phased out for most residential properties, but for furnished holiday lettings, specific reliefs may still apply.
• Insurance and Letting Agents’ Fees:
  Premiums for landlord insurance and fees paid to managing agents are fully allowable. Accurate record-keeping ensures these are not overlooked.

Investment and Share-Related Claims

Investors also have opportunities to claim reliefs and reduce tax liabilities:

• Capital Gains Tax (CGT) Adjustments:
  • Losses can be offset against gains in the same year or carried forward.
  • Annual exempt amount: £6,000 for 2025/26.
  • Example: Selling shares for £12,000 gain but with £5,000 in losses allows a net taxable gain of £7,000. After the annual exempt amount, only £1,000 is subject to CGT.
• Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS):
  Investments qualify for income tax relief and CGT deferral relief. Many taxpayers fail to claim the additional 30% (SEIS) or 30% (EIS) relief through their self-assessment. These claims can reduce tax bills significantly when shares are disposed of or gains reinvested.
• Dividend Allowances and Tax Credits:
  Since 2016, the dividend allowance is £1,000 for 2025/26. Taxpayers often misreport dividends received from foreign or UK sources, resulting in unnecessary overpayment. Accurate claims can recover significant amounts, particularly for retirees or those with investment portfolios.

HMRC Deadlines and Practical Tips

Timely submission is critical. Tax claims must comply with the following deadlines:

Practical Advice for Claiming Tax Relief

1. Maintain Detailed Records:
   Receipts, invoices, bank statements, and contracts are essential. HMRC may request supporting evidence during reviews.
2. Check for Overlaps:
   Some expenses may qualify for multiple reliefs but cannot be double claimed. For example, claiming capital allowances on a piece of machinery already accounted for in trading loss calculations may trigger disputes.
3. Use HMRC Digital Services:
   The HMRC personal tax account is now centralised for PAYE, income tax, and self-assessment claims. Online submission often speeds up processing and reduces errors.
4. Seek Expert Guidance for Complex Claims:
   High-income taxpayers, landlords with multiple properties, or business owners claiming multiple reliefs can benefit from professional advice to avoid overpayment or penalties.

Case Studies: Applying Advanced Tax Claims

• Case 1: Landlord Claim
  David, a higher-rate taxpayer, spent £3,000 on boiler repairs and £2,000 on property insurance for his rental property. His allowable deductions were limited to these amounts against rental income, reducing his taxable profit by £5,000. At 40% tax, he saved £2,000.
• Case 2: EIS Investment
  Emma invested £50,000 in an EIS-qualifying startup. She claimed 30% income tax relief (£15,000) and deferred CGT on gains from other share sales. This structured claim reduced her effective tax liability significantly, demonstrating how strategic investment can double as a tax planning tool.
• Case 3: Trading Loss Adjustment
  Liam, a freelance developer, incurred £12,000 in losses in 2023/24. By carrying back the loss against previous year profits, he reclaimed £3,600 in overpaid tax immediately, rather than waiting to offset future profits.

Conclusion

Maximising tax claims in the UK is both an art and a science. Whether you are an employee, self-employed, landlord, or investor, understanding the types of claims available, maintaining meticulous records, and acting within deadlines is crucial. Many taxpayers overlook legitimate claims, resulting in lost refunds or higher liabilities. Proactive management—particularly for complex situations involving investments, business losses, or property income—ensures not only compliance with HMRC but also the recovery of funds that rightfully belong to you.

Key Takeaways for Action

• Review your tax position annually and identify overpayments.
• Keep detailed records for all potential claims.
• Understand which reliefs and allowances apply to your circumstances.
• Submit claims within HMRC deadlines.
• Consider professional guidance for complex scenarios, particularly for CGT, EIS/SEIS, and multi-property landlords.

To read more about how to claim tax, visit My Tax Accountant