How do tax rebates work?
1 in 3 in the UK people overpay income tax and actually pay the government more than they should. It is the money that you overpay that we are able to reclaim for you. This money is legally yours and you are fully entitled to ask for it back. Everyone has the right to claim their tax refund regardless of nationality and it won’t affect your visa or residency status.
In the UK, everyone is given a tax-free allowance. For the tax year ending 5th April 2013, this tax-free amount is £8,105. This amount is divided by 12 equal portions (to relect 12 months in the year) and every pound that you earn over this monthly amount is then taxed at 20% (up to a yearly salary of £42,475).
Sometimes, when changing employers, employees may be given a BR or OT tax code, which means that they are not given their personal allowance entitlement. First thing to do is to talk to your employer's payroll department. In most cases, they would still be waiting for HMRC to communicate your new tax code to them, so your employer can use it when working out your wages. Provided that you gave your new employer parts 2 & 3 of your P45 in the first place, this should normally get resolved within 6-8 weeks, and your overpaid tax would automatically get refunded through your wages.
But sometimes it doesn't get resolved. It is a good idea then to contact a tax agent - a tax specialist - like TaxRefundPro so we can ascertain if you are due a refund. Provided you give sufficient information about your earnings and the tax you paid, we should be able to tell you instantly if you are due a tax refund, and if yes, how much. However, please note that a tax agent cannot reclaim your overpaid tax within the same tax year. Except if you are permanently leaving the UK, tax agents can only submit a claim for a tax refund for tax years that have already lapsed i.e. 2012/13 tax year is the first tax year we can submit a claim for a tax refund
Who can claim a tax refund?
You can only obtain a tax refund provided that you have overpaid income tax in the first place and your claim does not exceed HMRC's time limit for a refund. Anyone who has worked in the UK at some point within the last 4 tax years and has overpaid income tax can claim their money back, going back as far as 6th April 2009.
There are several reasons why someone may have overpaid income tax while being employed. You may have had numerous changes in employment and gone in and out of periods of claiming Job Seeker's Allowance or ESA; you may not have been given a P45 when you left your last employment or maybe you simply forgot to give the P45 to your new employer! As a result your tax code may have been BR or OT, and provided you did not receive any automatic refund through your wages, then you may still qualify for a rebate.
Another common scenario is when someone leaves the UK and does not return to work or claim benefits in the UK within the same tax year. In all probability, this person would not have used up their personal allowance, which means they may qualify for a sizeable tax refund.
CIS workers and landlords who are part of the Non Resident Landlord (NRL) scheme would automatically qualify for a tax refund as they would have been charged income tax at source on their gross income.
Employees who earn a yearly income, which is less than their personal allowance threshold and were still charged income tax, would also definitely have a case for a tax refund. However, you can only be sure of this once the tax year has ended, or if your query relates to a tax year that has already lapsed i.e. 2012/13 tax year
Do I have to pay tax if I'm from overseas or a student?
Yes. Everyone who works in the UK is liable to income tax, regardless of nationality. However, everyone is also entitled to a personal allowance, which is a tax free amount you can earn. This amount varies depending on the year in question. For the 2012/13 tax year, everyone can earn £8,105 tax free. Earnings between £8,105 and £42,475 are then taxed at 20% and earnings from £42,476 to £150,000 are taxed at 40%. The personal tax-free allowance is divided in 12 equal portions, equivalent to the 12 months of the year. Any monthly earnings over the 12th of the personal allowance is liable to income tax.
Students and part-time workers often believe they don’t have to pay tax because they only work part time, which is a misconception. Students and part-timers are not automatically tax exempt, regardless if they are under 18 years of age! But if by the end of the tax year their gross income ends up being below their personal allowance threshold and they were still charged income tax, then they would have overpaid income tax & they would definitely qualify for a tax rebate.
What will I need to do to make a tax rebate claim?
We will send you out a claim pack, which will contain all the forms that you will need in order to claim back your overpaid tax and that will authorise us to act on yor behalf. The forms inside will vary slightly depending on your personal situation. You will simply need to sign these forms, fill out a basic questionnaire and employment history and return these to us free of charge in the freepost envelope provided.
We will also need all the original P45 and P60 documents that you have. If you no longer have these for any reason, you can supply instead the last payslip for every employment you had in the UK. If you do not have any of these documents we offer a service where we can obtain this information on your behalf. Please contact us if you would like to discuss this further.
Do I need a national insurance number to claim my tax back?
Yes, you do. You cannot claim a tax rebate without it. However, if you worked in the UK without a NI number then you are virtually guaranteed to be due a refund as you would have been placed on a special tax code.
Whether you are still in the UK or have already left, you will still need to apply for and obtain a national insurance number from the Department for Works & Pensions before your claim for a tax rebate can even be considered by HMRC.
What is a P45 or P60 and why do I need to send the originals?
A P45 is a document that your employer gives you when you have finished working with them. It will show you how much you have earned and how much tax you have paid during the tax year. You should keep part 1A for your records and give parts 2 & 3 to your new employer so they can communicate your tax position to HMRC.
A P60 is a document that your employer will give you every year at the end of the tax year on 5th April. It is a statement that shows how much you have earned and how much tax you have paid, as well as the tax code that was applied. If you have more than one job you should receive a P60 for each job you have.
HMRC often ask to see the original documents. They will only accept a statement of earnings, or a copy at their discretion, if the originals have been lost. When HMRC has finished processing your claim they will normally return the original documents to your last known address.
What does PAYE and CIS stand for?
PAYE stands for Pay As You Earn and will apply to you if you are employed by a company or an individual. It means that you pay your tax and national insurance out of your wages each month “as you earn”.
CIS stands for Construction Industry Scheme and only applies to some people who work in construction. They are self employed but as part of the CIS scheme they are charged income tax at source, on their gros income. Most CIS workers will know if this applies to them as they will have registered under the scheme. It is a mandatory requirement that CIS workers fill in a self assessment tax return at the end of each tax year, regardless of the fact that they already paid tax at source. Failure to do so within HMRC's stipulated deadlines will automatically be sanctioned by heavy financial penalties.
When can I submit a claim and how long can I claim for?
You can claim your overpaid tax when the tax year has finished, which is after 5th April and for the previous 4 tax years
If however you are leaving the UK or have stopped working for the rest of tax year then we can claim back overpaid tax for the current tax year at any time.
You can claim any tax you have overpaid during the past four years. Currently this will take us back to the 2009/10 tax year, which started on 6th April 2009. HMRC have recently been reducing the number of tax years that you can claim for so it is best not to delay your claim unnecessarily or you may lose your entitlement.
How long will it take to receive my refund?
Provided you submitted correct information in the first place, it should not take more than 4-6 weeks from the date that we submit your claim to HMRC.
During busier periods of the year, typically around January and April, this may take longer. It is important to note that any timescales that we quote are directly provided by HMRC and these are subject to change at any time. It is important to remember that we also don’t get paid until you receive your refund and so we do everything we can to ensure the turnaround time is as quick as possible.
Can you transfer my money to a bank abroad?
Yes, we can transfer your money to any overseas bank accounts.
For refunds of up to £2,000 we will usually charge you a £17 transfer fee, which simply covers our bank charges. There are individual countries (eg. Brazil) where this may vary. We can issue refunds directy into UK bank accounts for free, or issue you with a cheque for free.