04 November 2009
Sample letter to claim Income Tax (PAYE) refund in the UK
-------- Beginnig of the letter -------------
<Date>
<Your full name>
<Your address>
<Your National Insurance Number (NIN)>
Dear Sirs,
I am writing to request a repayment of an overpayment of Income Tax for the tax year <tax year you are claiming the refund (e.g.: 2009/10>. As noted in the enclosed forms, I left the UK on <date you left the UK> and think I have overpaid Income Tax. According to my calculations, I have paid £ <amount in pounds according to your calculations> in excess.
Please find enclosed a copy of my P45 along with the P85 which should provide a complete work history for your records.
If you have any further questions please do not hesitate to contact me on <e-mail address> or <phone number>.
Yours sincerely,
<Your full name>
<Your signature>
-------- End of the letter -------------
Some things to consider:
- Make a copy of all the information you will send to the Tax Office in the UK.
- Remember that the letter should be addressed to your appropriate Tax Office, not a random one. If you send the letter to the wrong office, they will reject it. They will not forward the letter to your appropriate tax office.
- Send the letter by certified post to have proof that the letter has been received.
- While not mandatory, it is recommended to include your own calculated refund amount in the letter.
You can find further information about the entire process of making the UK Income Tax refund claim in the following entry: Tax Refund when you leave the UK: PAYE, P45, P85.
03 November 2009
Successful tax refund claim when leaving the UK: PAYE, P45, P85
In a previous post I had explained the steps to follow in order to prepare a successful tax refund claim, specifically for Income Tax or PAYE (Pay As You Earn), once you stop working in the United Kingdom: Tax Refund when you leave the UK: PAYE, P45, P85.Well, I must say that my claim was successful and the money was already paid into my British bank account and last week I received a letter from the HM Revenue & Customs with the tax refund calculation details, along with a practical guide called "Understanding your Tax Calculation". The refund amount I had previously calculated was correct and the money was paid into my bank account with no problems, within a reasonable period of time. The whole process took me about a month, so the main purpose of this post is to encourage claiming the tax refund to all those who have given up, thinking that it will be a long and bureaucratic process, and probably will not get what they want.
Below is a chronological summary of the steps I took to get my money back:
- September 14th: I sent all the required documentation (P45 Parts 2 and 3, P85) to the tax office in the UK by certified post along with a handwritten letter indicating my own calculation.
- September 21st: The letter arrived to the appropriate Tax Office in the UK.
- October 16th: The claimed amount was deposited into my British bank account whose details I had provided in the form P85.
- October 29th: I received a letter by post from the appropriate UK Tax Office stating that my claim was accepted and the money will be paid into my UK bank account provided in the form P85. The letter had been sent on October 8. You can see the first page of this notification on the picture included in this post.
As you can see, the entire process since I sent the letter until I received the formal answer from the UK Tax Office, took about 45 days. 30 out of those 45 days were notifications travel time. The overall time elapsed from the day the UK Tax Office received my letter (September 21st) until they sent me the formal notification (8th October) was only 18 days.
As a final comment, if you don’t own a bank account in the United Kingdom, they can send you a check along with the formal notification (you also can provide a friend’s bank account in the form 85). The UK Tax Office doesn’t make payments into foreign bank accounts.
17 September 2009
Tax refund when you leave the UK: PAYE, P45, P85
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 6th April and ends on 5th 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:
- 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.
- 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.
- 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!
UPDATE 29th October 2009: The tax claim I made has been successful and I've received the payment into my UK bank account. Find the details of my story on the following entry: Successful tax refund claim when leaving the UK: PAYE, P45, P85.
