Claiming A Tax Refund When You Stop Work
UK Tax Refund Tips
If you’ve recently stopped working, it might be possible for you to claim back a percentage of the Income Tax you’ve previously paid.
Whether you’re out of work because you’ve become unemployed, you’re now retired or you’ve returned to studying, this information should help you to understand when an Income Tax refund may be available to you and how you can claim it.
Am I Eligible?
If you stop working part way through a tax year then there is a chance that you have paid too much tax for that year. A tax year runs from the 6th of April to the 5th of April the following year. There are certain criteria profiles that you must fit into to determine whether you are eligible for a tax refund.
If you were paying tax through a Pay As You Earn (PAYE) method when you were an employee and:
- You were made redundant and were unable to find a new position
- You were were employed for part of the tax year and didn’t receive any taxable state benefits for the remainder of the tax year
- You retired part way through the tax year
- You received payments after leaving, for example termination payments such as compensation for loss of office or employment, unpaid holiday pay, payments in lieu of notice or redundancy payments
- You are a student that only worked in the term break or part of the tax year.
When you are self-employed you have to approach tax in a different way and make ‘payments on account’ of your next year’s tax bill. If you stop work part way through the tax year there is a chance that you have paid more than you have to if you’ve made payments on account of the tax due for that year.
Regardless of whether you were self-employed or employed, the law states that if you have paid too much tax you are eligible for a tax refund of the amount you have overpaid.
How To Claim A Tax Refund When You’ve Been Employed
If you think you’ve paid too much tax through PAYE (which is the method of payment when employed) there are certain circumstances that you will need to take into account.
If you were unemployed for a minimum of four weeks, or if you retire, or return to studies:
You will need to claim a tax refund from HM Revenue and Customs if:
- You have returned to studying
- You have been unemployed for at least four weeks
- You have retired and are not receiving a pension from your previous employer
The tax refund can be claimed by filling in the ‘Claiming tax back when you’ve stopped working’ form (P50). This must be sent to HM Revenue and Customs along with your parts 2 and 3 of your P45 (keep part 1A for your personal records). Any tax refund that you are entitled to will be posted to you by HM Revenue and Customs, as well as a new P45 if necessary.
If you receive a pension from your old employer subsequent to retirement then you will also receive any pension payments and therefore won’t have to claim a tax refund with a P50.
If you have been made redundant then it is important to contact HM Revenue and Customs prior to completing a P50 in case there is any other information that is necessary to provide.
If you’re claiming Jobseeker’s Allowance, taxable Incapacity Benefit, or taxable Employment and Support Allowance:
If any of the above occur then it is likely that you will be unable to claim a tax refund right away due to the taxable nature of the aforementioned benefits and the effect that can have on any refund that you can claim.
In order to make sure you receive any tax refund that you are entitled to, you will need to give your P45 parts 2 and 3 to the Benefit office (again, keeping part 1A for your own records).
If you are claiming Jobseeker’s Allowance, normal circumstances mean that the Benefit office will automatically pay any refund entitled to you at the end of the tax year. If you stop claiming Jobseeker’s allowance before that time then the Benefit office will pay the refund to you after you have stopped claiming.
If you are claiming Incapacity Benefit or Employment and Support Allowance the same will occur; you will receive any refund you are entitled to after the end of the tax year or once you have stopped claiming.
In the case of redundancy, HM Revenue and Customs may be able to pay a tax refund during the tax year- in which case you should contact them and they will advise you on the information that is necessary to provide.
If you start a new job within four weeks:
If you begin a new job within four weeks of finishing your previous one then your new employer will pay any tax refund you are entitled to along with your first month’s wages.
The new employer will need your P45 parts 2 and 3 to check whether you are eligible for a tax refund (you keep part 1A for your personal records). If you received any payments since leaving your previous job role then you should contact HM Revenue and Customs. Payments could mean any unpaid holiday pay, payments in lieu of notice, or any other termination payments. They will offer advice on which information will be necessary to provide and which form is most helpful for you to complete.
How To Claim A Tax Refund When You Were Self-Employed
In the event of self-employment terminating it will be necessary to complete the appropriate pages of you Self Assessment tax return in order to claim a tax refund to enable HM Revenue and Customs to repay any tax that you have overpaid along with any interest that you may be entitled to.
Alongside your Self Assessment tax return for you will need to provide HM Revenue and Customs with details on how to process the refund. They can pay it either:
- To you
- To your nominee (for example, your accountant)
- Straight into your bank account
- Straight into your nominee’s bank account
For more information on tax, and for answers on questions about the upcoming end of the tax year, please don’t hesitate to contact the Expert Wealth Management team on 01993 772467. You can also contact us online today!This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.