Said goodbye to friends?
Set up your virtual office?
Got an ideal beach in mind?
There is a lot to organise if you decide to leave the UK to go back to your home country… Or a new location…
And here is something else you should put on your to-do list… Claim back tax!
This is also important for UK expats and expat tax returns.
Emigration from recession-hit Britain hit a record level in 2008, with nearly 500,000 people leaving the UK for a new life overseas. Around 70% of these were foreign nationals returning to their native countries – the remaining 30% were UK nationals starting a new life abroad in countries like Australia, Spain and France. We have clients in these countries too.
These emigration figures look set to continue growing as more and more people in Britain choose to head abroad to avoid the economic down turn. And yet, of the large numbers flowing out of Britain each day, many are completely unaware that they can claim a tax refund when they leave UK.
First we’ll explain when, why and how much you will be able to claim – then take a look at how to go about claiming a tax refund if you are eligible.
1. Can I claim a tax refund if I am leaving the UK?
Almost certainly. If you are working in the UK and leave Britain part-way through the tax year it is highly likely that you will have paid too much tax by the time you quit your job. Most of us, if we were working temporarily in the UK and leave before the end of the tax year (5 April) are entitled to claim back some overpaid tax. Here is why:
Your personal allowance
If уоu аrе resident in thе UK (thаt iѕ, if уоu mееt thе ѕtаtutоrу rеѕidеnсе tests), then you will most likely be entitled to a реrѕоnаl аllоwаnсе. This is the amount of money you can earn tax free each year. You will be classed as UK resident if you meet the statutory residence test.
The personal allowance is £10,000 in the 2014/15 tax year and every month or every week you are entitled to 1/12 or 1/52 of it on a cumulative basis (depending on whether you are paid monthly or weekly). Say you leave the UK on 1 October 2014, i.e. halfway through the tax year, you are likely to have received only half of the personal allowance that you are entitled to for the year. So, if your income was below your annual personal allowance and you had any tax deducted from your pay, you should be entitled to a non-resident tax refund.
But what if you left the UK some years ago? Here is the good news: You can claim back tax for up to the past four tax years. However, you should be aware of the various personal allowances that applied in the respective years: 2010/11: £6,475
If you have other income
If you had other income, such as savings, investment, property or self employment income, the situation gets a bit more complicated and your full income needs to be taken into account when calculating your tax liability at the time you leave the UK.
If you expect to continue to receive UK income after you leave the UK, HMRC will not issue a tax refund before the end of the tax year (5 April). Instead, your total tax liability will be assessed at the end of the tax year and any refund that may be due to you will be issued to you then.
2. Why am I owed a tax refund?
Everyone in Britain is entitled to an annual tax-free allowance. It’s an amount of money each of us can earn before we have to pay tax – and it’s currently set to £6,475 a year. The amount of tax you pay each time payday comes around is nearly always based upon the assumption that you’ll be earning that same amount each week / month for the rest of the tax year.
3. How much can I claim back?
The precise amount you’ll be able to claim back will depend upon your earnings and the total amount of tax you have paid.
When you leave your employer they’ll give you a P45 detailing a) how much you’ve earned and b) how much tax you’ve paid (both since the beginning of the tax year).
Once this has been received, it is then used to calculate the amount of tax refund you are eligible to claim.
4. I’ve already emigrated – can I still claim?
If you have emigrated since April 2004, you can still claim – but our advice is to act fast. The January 31st deadline for PAYE tax claims is approaching, and after this date we’ll be unable to submit claims for the 2004/5 tax year.
5. What if I return to the UK?
If you return to the UK after the following 5 April (i.e. after the end of the tax year), there won’t be any problems. If you intend to return before 5 April to work, you should not apply for a tax refund at the time you leave the UK. If you do so, HMRC may ask you to repay the refund you may have received. Instead, you should apply for a refund after the end of the tax year.
So, if you are leaving the UK, don’t forget to claim your tax among all the packing and planning.
Ruth Noel consults and advises entrepreneurs, small business owners & startups on tax and business strategy. Ruth is the author of ‘How to Make Your Tax Sexy’, with over 100 published blog articles to help with money, tax and business growth. She is also the founder of, TaxTwerk.com