If you’ve just stopped working, you may be able to claim back some of the Income Tax you’ve paid. This could be because you’ve retired, returned to studying or because you’ve become unemployed. This article explains when an Income Tax refund might be due to you and how to claim a repayment if you’ve paid too much tax.
When a tax refund might be due
A tax year runs from 6 April to 5 April. If you stop working part way through a tax year, you might have paid too much tax for that year.
This can happen if you were paying tax through PAYE (Pay As You Earn) as an employee and:
- you were only employed for part of the tax year – and didn’t get any taxable state benefits for the rest of the tax year after you stopped working
- you retired part way through the tax year
- your employer was using the wrong tax code
- you’re a student and only worked in the holidays but didn’t complete a form P38(S) ‘Student Employees’
- you were made redundant and couldn’t get another job
If you’re self-employed, you have to make ‘payments on account’ of your next year’s tax bill. If you’ve made payments on account of the tax due for the year when you stop working, you might have paid more than you have to.
Whether you were employed or self-employed before you stopped work, if you’ve paid too much tax you’ll be able to claim a repayment of the amount that you’ve overpaid.
- Taxable and non-taxable income at a glance
How to claim a refund if you were employed
If you were employed before you stopped work, you’ll have paid tax through PAYE. If you think you’ve paid too much tax through PAYE, the way to claim a repayment depends on your circumstances.
If you’re claiming Jobseeker’s Allowance or taxable Incapacity Benefit, you won’t be able to claim a tax refund straight away. This is because these benefits are taxable and affect any refund that you can claim.
You’ll need to give form P45 Parts 2 and 3 to the Benefit Office to make sure that you get any tax refund you’re entitled to – you keep Part 1A for your own records.
If you’re getting Jobseeker’s Allowance, the Benefit Office will pay any refunds you’re entitled to
after the end of the tax year. If you stop claiming Jobseeker’s Allowance before the end of the tax year, the Benefit Office will pay any refund you’re entitled to after you’ve stopped claiming.
If you get Incapacity Benefit, you’ll get any refund you’re entitled to after the end of the tax year.
If you start a new job within four weeks of finishing your old one, your new employer will pay any refund you’re entitled to with your pay from your new job.
You’ll need to give your new employer the P45 Parts 2 and 3 to make sure that you get any tax refund you’re entitled to – you keep Part 1A for your own records.
If you think you’ve paid too much tax, you’ll need to claim a tax repayment fromHM Revenue & Customs (HMRC)if any of the following applies:
- you’ve been unemployed for at least four weeks
- you stopped working because you’ve retired and you’re not getting a pension from your old employer
- you’ve returned to studying
You can claim a tax repayment by filling in form P50 ‘Claiming tax back when you have stopped working’. Send this to your Tax Office, together with form P45, Parts 2 and 3 – and keep Part 1A for your own records.HMRC willsend you any tax refund you’re entitled to by post, they willalso send you a new form P45, Parts 1A, 2 and 3, if necessary.
If you retire and get a pension from your old employer, you’ll get back any refund you’re entitled to with your pension payments. You won’t need to claim a tax repayment using form P50.
How to get your refund if you were self-employed
If you have stopped being self-employed, you can claim a tax refund by completing the appropriate pages of your Self Assessment tax return.
HMRC will repay any tax that you’ve overpaid, together with any interest that you’re entitled to. You’ll also need to give them details of how you wantthe refund to be paid. It can be paid:
- to you
- straight into your bank account
- to your nominee – this might be your accountant
- straight into your nominee’s bank account
- to a nominated charity
If you file your tax return online, the figures are worked out for you automatically. You’ll find out straight away how much tax you’ll get back.