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How to reclaim tax when you stop working

In the United Kingdom, a tax year runs from 6th April to 5th April. Whether you are employed or self-employed, the law requires that you pay tax. It is possible to overpay tax, especially if you stop working part way through the tax year. In this case, you are entitled to reclaim tax for the overpaid amount.

Reclaiming tax

Usually, when you are employed you pay your tax through Pay As You Earn (PAYE). If you are self-employed, you make payments to the government based on your next year’s taxation bill. If, for one reason or the other, you stopped working within the tax year and you think you might have paid more than you are required, you can make a tax reclaim with the HM Revenue Customs (HMRC).

Making a tax claim

HMRC is the government department responsible for ensuring tax is paid correctly and on time. To reclaim tax when you stop working, write to HMRC and make your reclaim. Provide all the relevant documents about the earnings you made in the tax years you are claiming a refund for overpaid tax. Make sure to include information about your tax benefits and employment history.

Fill in form P50 and form P45 parts 2 and 3 and send them to HMRC together with the other supporting documents. Keep Part 1A of from P45 for your own records. The forms can be obtained from HMRC offices or at their homepage at http://search2.hmrc.gov.uk/kb5/hmrc/forms/home.page. HMRC will review you case and send your refund tax by post.

Tax refund after retirement

If you stopped working due to retirement and you get a pension from your old employer, you do not need to file for refund in overpaid tax using form P50. You will automatically get any tax refunds due to you together with your pension payment.

Taxable allowances

You will normally not be able to reclaim tax straight away on taxable allowances, such as Jobseeker’s Allowance, Support Allowance and taxable Incapacity Benefit. These benefits are taxable, meaning they have an affect on any refund claim that you may make. HMRC has to first look into your tax query and work out how much they owe you after tax has been deducted on the benefits. Then they will send what is due to you in the post.

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