Are You Due a Refund for UK Tax ?

There are many ways that you can be entitled to a Tax refund in the UK. On average about one in three people on PAYE are entitled to a refund but are not aware of it.

It is estimated that some where between a third and a quarter of the UK PAYE employees are entitled to a tax refund. Usually these refunds can amount to some where between £750 and £1,250.

What is even more amazing is that the majority of these people have no idea that they are actually due a tax refund. Why should they be aware? After all they receive a computer generated pay slip so it appears to be correct. Of course often it is not and some thing like 25% of payslips are wrong.

This happens as the UK PAYE Income Tax system is unable to make any real intelligent conclusions as it is solely dependent on the information that it receives. After all it is a massive and complex system and works very well for the average employee.

Where it is often incorrect is that it is not fed the correct data in the first place. That is like a computer system if you input garbage you get garbage as your output it is simple as that. Where it often goes wrong is as soon as you have an exception that it cannot get it correct unless or until it is updated and corrected.

If you are given the correct tax coding and you work a full tax year for the same employer and they apply the correct tax code then you should be correctly taxed. Already there are three variables - you need to have been given the correct tax code - you need to work a full tax year and you employer needs to apply the code correctly.

There are many examples that can give rise to an exception that can usually mean that a PAYE employee is over taxed.

How this arises is as follows:

You start your employment part way through the Tax Year and are on an emergency code or even worse an OT code. An emergency code means that you would not be given your full personal allowances in the Tax Year. An OT code would mean that you would be given no personal allowances at all and would have your income taxed at basic rate.

You leave the UK part way through the Tax Year again you would not have been given your full personal allowances in the tax year

A classic example could be some one who starts halfway through one tax year and then leaves the UK in the second tax year..

Or where some one leaves the UK part way tgrough a ta x year and then comes back part way through the following year usually to be taxed on an emergency basis. Quite often they will be entitled to a tax refund for the year when they left the Country and a refund for the tax paid in the year when they returned to the UK.

This can often happen with students who work outside their term time and are very often due an Income Tax refund.

Recently I saw one case where the refund actually received was in excess of £4,400 and this covered four tax years. In addition the current tax years PAYE code was amended resulting in a Tax refund in one month of some £900 so in total that's a great refund £5,300.

This refund arose as an incorrect code number had been issued by the Inland Revenue restricting the personal allowances when in fact full personal allowances were due.

So it is well worth checking with a Tax Agent to ensure that you are not due a refund.


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The Author writes many articles on UK Income Tax,Pensions and Tax Plannin and for more information please go to UK Tax Refunds