Tax refund when you leave the UK: PAYE, P45, P85

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Have you worked for a while in the United Kingdom (UK)? Have you decided now to return to your country or you have already returned? So, you should know that you've probably paid more tax than you had to and the UK tax office (HM Revenue & Customs) must give you a refund.
Unlike other countries, where the employer takes care of this procedures and returns to you all the taxes you paid in excess on with your final payslip, in the UK you have to take care of it because the employer will not do it for you. Nobody is going to warn you nor voluntarily pay you taxes back. If you don’t take care about it, the taxes you paid in excess will remain with the British government.
It’s not the purpose of this post to explain the tax system in the United Kingdom (UK). I will focus on how to make a claim for overpaid taxes according to my own experience. So if you'd like to know how the complex UK tax system works, I recommend you visit the official website of the HM Revenue & Customs. On this post, we will focus on refunds of the Income Tax or PAYE (Pay As You Earn), which is the tax deducted from salaries according to your yearly gross income. We will not write about the National Insurance contributions (NI Tax). The NI tax, according to my modest knowledge, can’t be recovered (if anyone knows how to get a NI tax refund, please advice!).

Why does the UK deduct taxes in excess?

As the PAYE is an annual tax, the amount should be calculated on the basis of how much a person earns annually. What the UK tax office does is, according to your annual gross salary informed by your employer, calculates the tax, splits the amount in 12 parts and deducts the tax in installments from the first month of the fiscal year, rather than deducts the full amount at the end of the fiscal year. What happens when we stop working in the UK is that we have paid PAYE tax for an annual income that we didn’t perceived.

I left the UK and was not aware of this ... Can I still claim for a refund?

The first thing we have to know is that the tax period in the United Kingdom (UK) begins on 6^th April and ends on 5^th April the following year. You can only claim a tax refund for a tax year that you have not worked completely. If you worked in the UK some years ago and you were not aware of this, keep reading because you can claim a tax refund from the last 6 tax periods.

I paid too much tax ... What are the next steps?

The steps you have to take are the following:

1. Your tax office: Find out what is the right tax office where you have to submit your claim by postal mail. Your employer’s Human Resources department should provide you with that information. If you've worked for some time and have received a P60 before, you can find that information there.
2. Form P45: Your employer must give you that form when you stop working, with our final pay slip. It basically contains the information about the gross salary you have received and how much tax you have paid in the current tax year at the moment you leave. This is information the tax office will be based to calculate the tax refund. You must send the original P45’s parts 2 and 3 and keep part 1 for your own records.
3. Form P85: You can download this form from the HM Revenue & Customs website, or here. The P85 is a form where you basically establish that you are leaving the UK and you have no intention in the short term to return to work there and you won’t keep any business activities in the UK that could mean you're still liable to pay taxes there. Also on that form you indicate the details about the payment method you want for the refund. The options are a United Kingdom (UK) bank account deposit or a check.

I already have all the information… Now what?

Once you complete the form P85, you send it together with the form P45 (parts 2 and 3) by postal mail to the appropriate tax office. You can find the tax office address clicking here, inserting the 3-digit tax office code you can find on the form P45. It is also good practice to include a letter where you indicate that you have left the country with no intentions to return in the short-term, that you have paid too much tax and so, request a tax refund. Include your estimate amount of money the UK tax office should return to you. We recommend sending the letter by certificate post mail, since you will include the original parts 1 and 2 of the form P45, and if they get lost in their way to the UK, you won’t be able to recover them.

How do I know how much refund they should give me back?

You can manually perform the calculation, taking into account the appropriate tax thresholds for the fiscal year to left the UK. Alternatively, you can find on the Internet a lot of companies that provide advice and calculators. As an example, you will be able to find a free calculator by clicking here.
For anyone who wants to further information about the Income Tax, please visit the appropriate section on the official website of the HM Revenue & Customs - Income Tax.

Good luck with your claim and don’t forget to share your experience with us!