Tidy Up Your Tax Affairs When Leaving The UK

Emigrating is a truly life-changing event, with so many important things to plan ahead. Most people who are serious about emigrating will carefully prepare their new life ‘down under’ in order to muster any chance of success. So you’ve sorted out your visa and a place to stay? Good. And you secured that new job too? Excellent. Packing & moving arrangements all done? Splendid!

Don’t Leave Your Rebate Behind When Leaving The UK

Yet, many UK migrants overlook their ongoing responsibilities as UK tax payers – or worse, some choose to simply ignore them. Tidying up your tax affairs with HMRC when you emigrate doesn’t sound like fun but it is a necessary chore if you want to avoid Mr Taxman rearing his ugly head and causing you unnecessary headaches in future. And no, he will not let go if…any tax liability remains unpaid or if you fail to submit a tax return, regardless how far away you are from Britain.

In other cases, many migrants unknowingly leave some of their hard-earned in the hands of the taxman because of a simple lack of understanding of their rights! So what should you do in order to tidy up any loose ends regarding tax?

First of all, contact HMRC before you leave. Doing it from a different time zone is not an ideal scenario. They do not accept email communication so ring them or write to them. Tell them your exact leaving date & your new overseas address.

If you are employed – and this is a really interesting part! – you may be able to claim back any unused portion of your personal allowance in the form of a tax rebate. You can do this yourself by completing a P85 form ‘Leaving the UK – Getting your tax right’ (that is if you are confident in what you’re doing and are ready to invest time chasing it up!). The form is downloadable for free from HMRC’s website. Alternatively, you may prefer to hire the services of a tax refund company to complete the paperwork and chase your tax rebate for you. Whichever you choose, the point is it’s much easier if you start proceedings before you leave.

Secondly, don’t ignore letters and notices from HMRC. HMRC automatically sends reminders to self employed tax payers about completing a self assessment tax return. The same applies if you already told HMRC that you will be receiving income from renting out a property (or several) in the UK. HMRC will send these reminders to your last known address so it’s important that you update HMRC with your new address overseas. You must comply with these requests to submit a tax return within the stipulated deadline otherwise you could incur severe financial penalties, worth up to £1,600 per tax year – even if your tax liability ends up being nil, the penalties will still stand and need to be paid in full. Unfortunately, HMRC will not accept ‘I didn’t know anything about it’; ‘I just forgot’ or ‘I was too busy’ as a valid excuse. Being careless won’t cut it with Mr Taxman.

Another classic oversight – Tell your pension provider your new overseas address so they can send you yearly statements. These could become crucial information that HMRC may request at a later date (sometimes way in the future) so you want to ensure you have them with you. Again, chasing up pension statements from the Antipodes ten or twenty years down the line could prove a stressful exercise (especially if in the meantime the provider merged with another company or simply went bust and you never got the letters telling you all about it ).

Here are other useful tips and information:

What is the personal allowance?

Under PAYE (the ‘Pay As You Earn’ tax system for employees, designed to deduct income tax at source) tax payers are entitled to receive a personal allowance. It is the tax free amount that anyone in the UK is entitled to earn without having to pay any income tax, within a tax year. The rate of personal allowance changes nearly every year and is decided by the Chancellor of the Exchequer.

What is a tax rebate?

According to HMRC’s own statistics, 1 in 3 tax payers are due a tax refund, with an estimated £322 million remaining unclaimed every year. Under current guidelines, tax refunds (also known as tax rebates) can only go back as far as the last four tax years, so time is of the essence. Do not put off a claim as your entitlement reduces as time passes. The four-year rule means that you can currently claim any income tax that you’ve overpaid going back as far as April 6, 2009. But from 6th April 2014, you will only be able to claim back as far as April 6, 2010. This means that if you did overpay income tax prior to April 2010, you will not be able to claim it back as it would go over the four-year rule.

What is a tax agent?

A Tax agent is a person or a company registered with HMRC and authorised to look after a third party’s tax affairs (be it an individual’s or a company’s). Tax agents include accountants and tax refund companies. Tax agents can only look after someone’s tax affairs if the tax payer gave them express authority to do so by completing the form 64-8 ‘Authorising your agent’.

What are tax refund companies?

They are private firms who specialise in obtaining tax rebates from HMRC. Traditionally, tax refund companies lodge a claim with HMRC, chase it up and obtain the refund on behalf of their clients in exchange of a small commission fee. It is an industry standard that a fee is only applied once the refund is actually received from HMRC. Most companies operate a ‘No refund, No fee’ policy, which means that you won’t be charged for submitting a claim on your behalf if it turns out you are not due a refund. The fee is usually a percentage of the refund value itself. It is also often paired with a ‘minimum fee’ or ‘administration fee’, which is a chargeable flat amount.

How to select a reputable tax agent?

In most cases you can really save yourself considerable amounts of time and inconvenience by hiring the services of a reputable tax agent. It is a very competitive market so it pays to shop around. Trust your instincts before giving over the authority to deal with your personal tax affairs to anyone.

Although they should definitely be registered with HMRC as tax agents (like any accountancy firm), tax refund companies should not advertise themselves as being ‘’endorsed’’ or ‘’affiliated’’ or ‘’recognised’’ by HMRC or the UK government, or even infer that they are. The reason is that HMRC does not endorse private companies as a rule. A disclaimer should clearly be displayed on a tax refund company’s website informing visitors of that fact. If there is no disclaimer, just give them a wide berth as they are in clear breach of the law… and who wants to trust their money with a company displaying poor ethics?

Their website should also include clear and easy-to-understand information about the actual fees and services on offer – if the information regarding what they charge is missing or ‘fuzzy’, query it before committing to anything.

Some providers claim that they abide by some sort of professional body’s code of conduct. The truth is that HMRC does not endorse or recognise any of these self-professed watchdogs. Again, do not be fooled as this is just ‘marketing’.

The ‘average claim value’ is another common lure. Many providers state an average claim value i.e. “Our average claim value is over £1,600’’. In reality that figure is very likely to be unverified or sometimes pure fabrication. Any alleged ‘average claim value’ should by no means be interpreted as an indication of how much your own claim is likely to be worth. It is simply a marketing trick designed to attract gullible would-be claimants. No-one can say for certain if you are eligible for a tax refund or not – let alone estimate any refund value – without first examining any documentation regarding your pay and tax details i.e. Employment history; P45; P60; P11D; etc… Everyone’s situation being different, your claim can only be judged on its own merit. As the saying goes, if a statement or an offer sounds too good to be true, then it probably is.

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