Tax rebates offer a great opportunity to reclaim money if you’ve overpaid your taxes. But they’re often overlooked or misunderstood.
If you’ve recently changed jobs, worked part-time, or had deductions that don’t align with what you actually owe, you could be eligible for a rebate.
In this blog, we will talk about what is a tax rebate is, how much might be owed by you, and how you can claim your money back.
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What Is a Tax Rebate?
A tax rebate, also known as a tax refund, is a repayment of income tax, from a tax authority to a taxpayer who has overpaid their taxes. It is handled by HMRC in the UK, while some rebates are issued automatically, taxpayers often need to claim them.
Major Reasons For a Tax Rebate
As an employee, you can be entitled to a tax rebate if you have overpaid tax or haven’t claimed specific tax reliefs. Some of these common scenarios can include:
Switching Jobs Mid-Year
If you are changing jobs during the tax year, you might be put on an emergency tax code. This can result in too much tax being deducted from your new payslips until your correct code is applied.
Incorrect Tax Code
Any error in your tax code can cause your employer to withhold more tax than necessary through the PAYE system. This often happens if HMRC has outdated information about your employment or taxable benefits.
Leaving a Job
If you had stopped working part-way during the tax year, your previous tax deductions may be based on the incorrect assumption that you would have worked for the full year.
Work-Oriented Expenses
You can claim tax relief on some specific work-related costs that are not compensated by your employer. This can include:
- Necessary work travel like mileage
- Uniforms, tools and other equipment
- Laundry costs for a work uniform
- Professional subscription or fees
Pension Contributions
Overpayments can occur on pension income, especially when you first begin drawing from it.
Self Assessment Errors
If you are self-employed, and your payments on account are too high, you could be owed a rebate.
Step-By-Step Guide Claiming Your Tax Rebate
The process for claiming your tax rebate in the UK, depends on whether you pay too much tax through PAYE or Self Assessment. You can claim for the overpaid tax up to four years after the end of the relevant tax year.
The most common and the safest way to claim it directly with HMRC is through your Personal Tax Account. Following are the steps needed to claim your tax rebate:
Step 1: Checking Your Eligibility
You can be owed a tax rebate for several reasons:
- Having an incorrect tax code can be a common reason for paying too much tax, especially when you are starting a new job.
- You may be able to claim tax relief on costs not compensated by your employer like business travel, specialist clothing or professional fees.
- If you are working while being a student, you might overpay and be due a refund.
- If you are married and meet the eligibility criteria, the lower earner can transfer part of their Personal Allowance to the higher earner to reduce their overall tax bill. The transfer can only be done from a non-taxpayer to a basic-rate taxpayer.
Step 2: Gathering Your Documents
The information you need to claim depends on the reason for your rebate. You will require some or all of the following information:
- Your National Insurance number.
- Your relevant P60s (End of Year Certificate) and P45s (when you leave your job).
- PAYE reference numbers for your employers.
- Records of your income, such as payslips.
- Records of your work-related expenses, such as receipts.
Step 3: Using HMRC Personal Tax Account
For most of the people who pay tax through PAYE, the most simple and quickest way to claim is online.
- Access your Personal Tax Account on the government website and create a Government Gateway user ID if you do not already have one.
- View your income and tax position for the previous years. Your account will show if you have a P800 tax calculation from HMRC that states you are owed a refund.
- If a P800 shows a refund is due, then you can claim it online. Your money will directly be paid into your bank account within five working days.
Different Methods for Claiming a Tax Rebate
In the UK, the process for claiming a tax rebate varies depending on the reason for the overpayment. Most of the claims are handled by HMRC through your Personal Tax Account, especially when an overpayment has been identified by HMRC. You can typically claim a rebate for the current tax year and the previous four tax years by:
Through Your Personal Tax Account
It is the fastest method and can be used for most claims:
- Accessing your account, using your Government Gateway user ID and password. If you don’t already have one, you can create it.
- If an overpayment has been identified by HMRC and a P800 tax calculation is issued, a notification will appear in your Personal Tax Account. It will provide a link to claim the refund. For other types of claims, such as for job expenses, you may need to use a separate online service or form.
- Enter your required employment details for the relevant tax year and input any applicable expenses.
Through the HMRC App
You can also use the HMRC app on your smartphone or tablet device for a faster claim.
- Download the HMRC app from your device’s application store.
- Once you log in, go to the PAYE section to see a summary of your Income Tax for the current and previous years.
- If HMRC has determined you are due a refund, a button will appear for you to start the claiming process. The rebate will be paid directly into your bank account.
For Job Expenses (Form P87)
For the claims under £2,500 for a single tax year, you can use a P87 form, which can be submitted online or by post.
- Using the P87 form which is available online through the government website.
- You can submit the P87 form online through the government website. This is usually the quickest way. Alternatively, you can print the P87 form, complete it manually, and send it by post to the address specified on the form.
By Self Assessment Tax Return
If you claim a job expense of £2500 or more for the tax year, or you are already registered for Self Assessment, you must include your claim in your annual tax return.
- If you need to register for Self Assessment and are not self-employed, you can do so online or by using form SA1. The registration process for self-employed individuals is different.
- You can fill out and submit your annual tax return online, making sure to include your expenses in the relevant employment section. You should keep records and receipts.
Identifying a Tax Overpayment
You can identify a tax overpayment by comparing your total liability with the total amount of tax that you have already paid. Some of the main causes of overpayment include having an incorrect tax code, changes in your personal circumstances and miscalculations on your tax return.
Review Your Tax Documents
To review your figures from the previous year, gather your key tax documents.
- You can check the total tax deducted by your employer. The P60 form summarizes your total pay and tax for the current year.
- HMRC sends the P800 or the Simple Assessment forms between June and November if they believe that you have overpaid or underpaid tax at the end of the tax year.
- If you have filed a tax return, the official tax calculation will be available in your HMRC Personal Tax Account.
Bottom Line
To conclude, claiming a tax rebate from HMRC is a process that many individuals can manage. As the money legally belongs to the individual, HMRC has procedures in place to return overpaid tax.
While some rebates are automatically processed, taxpayers often need to proactively claim what they are due.
By understanding the reasons for a rebate and the correct claim procedures, you can ensure you receive any refund owed to you.
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Disclaimer: All the information provided in this article on What is a Tax Rebate, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.