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UK Tax Expat Refund Guide

Who is owed a Tax Refund?

Those who have been employed in the UK may well be due a UK income tax refund.

The reason for this is because of the way PAYE is calculated in the UK. PAYE stands for Pay As You Earn. Essentially what happens is that your employer will deduct the expected tax that you owe for the year on a pro-rata basis and then pay it over to HMRC.

With the PAYE system, typically, your salary is calculated for the year and then your personal allowances (the amount of tax free income you are allowed) are taken off and then your tax is calculated based on this.

Here is an example:

Tom works for Shell in the UK and earns £30,000. He leaves his job in the UK to go and work for a new employer in the UAE. He leaves his job in July and starts work in August.

Shell have calculated the amount of income tax that Tom owes a month as follows and subsequently pay this directly over to HMRC:

Salary £30,000.00
Personal allowances £10,000.00 2014/2015 year end
Taxable income £20,000.00
Tax @ 20% £4,000.00 Yearly
£333.33 Monthly

So in the example above, for the tax year 6 April 2014 to 5 April 2015, Tom has only worked for 4 months.

The amount of tax that Tom has paid before he leaves is £1,333.32 (4 months at £333.33) and the income he has earned is £10,000.00.

Tom has no intention of returning back to the UK in the 2014/2015 tax year. Tom has therefore over paid UK income tax and is entitled to a tax refund.

The reason for this is that even though Tom has left part way through the tax year, he is still entitled to his full personal allowance. As he will not be returning back to the UK he can therefore claim a tax refund.

The refund will be calculated as follows:

Salary £10,000.00
Personal allowances £10,000.00 2014/2015 year end
Taxable income £0.00
Tax @ 20% £0.00 Yearly
Tax paid £1,333.32
Tax overpaid -£1,333.32

Time limits for claiming

As with most things that HMRC do there are always time limits as to when you can claim. So it is important that you make sure you claim your tax refund as soon as possible!

The time limits for claiming your tax refund are:

Tax year Tax year ended on You must claim by:
2010 to 11 5 April 2011 5 April 2015
2011 to 12 5 April 2012 5 April 2016
2012 to 13 5 April 2013 5 April 2017
2013 to 14 5 April 2014 5 April 2018

How to claim

There are two types of ways you can claim and this comes down to whether or not you have to fill in a UK Self Assessment tax return.

If you DO NOT have to file a Tax return...

You can claim by filling out a P85 tax form and attaching a copy of your P45 too. Click here to start filling out your P85.

If you DO have to file a Tax return...

You will have to claim your tax refund when you file your Self Assessment tax return. The refund will be covered off when you fill in the Employment section of your tax return.