UK Tax Refunds

There are mainly two occasions when you can receive tax return in the UK. One is if you have been given the wrong tax code (this includes incorrect accounting management by your employer) and the other is if you leave the UK in the middle of the tax year.

The first case is clear enough and in most cases the error is automatically corrected once the tax year ends and the tax payer either receives the correct tax code where the tax deduction is automatically re-adjusted through the PAYE or he\she will receive the overpaid tax into the bank account around September or October.

In the second case, most tax payers are over taxed because their tax is deducted based on their annual income and taxation is adjusted every time a payment is made.

EXAMPLE: An employee started working at a company in April 2021 with £30,000 per annum or £2,500 per month, and is paid on a monthly basis. The employee decides to leave the UK and return to their country in August 2021. The relevant tax they will be required to pay for the year is £3,486.00 (or £290.50 per month) However, because the tax payer left in the middle of the tax year, the proportion is automatically incorrect as the income has not been distributed considering the entire tax-free allowance. Therefore. The proportion should be as follows:

£2,500*6= £15,000 - £12,570 (tax free for 2021/22) = £2,430 (taxable amount) * taxation 20% (for England) = £486 payable tax, while in our example the tax payer has paid £1,743 (£290.50 * 6). This means that tax overpaid is £1,257 (£1,743 - £486) and so they are eligible for £1,257 tax refund.

It should be noted that there are NO returns in social security (pensions included). When the time comes, your right to pension can be transferred to your country’s tax authorities if you leave the UK (or remain in the UK if you do not leave). Money paid for social security is intended for your healthcare and pension and so it is not returned.

-

Translated / Edited: Apostolia Nestoratou

© 2021 UPECO LTD

_

---

ATTENTION!

This article intends to give only a general informative picture and should not, in any case, be taken as a rule. It is strongly recommended to seek a full and professional guidance specifically for your circumstances before making any decisions.