Being made redundant can be one of the most stressful times in anyone’s life. While things are improving in the UK, many people are still claiming Jobseeker’s Allowance. If you are out of work or have been made redundant for a considerable amount of time, you may be due a tax refund from the HMRC.
How do tax overpayments happen?
The tax overpayment only arises because the yearly tax-free allowance is equally split across your pay packets. The PAYE system assumes that you will be working for the same employer for the complete tax year i.e. from (6th April – 5th April).
After you leave your employer, you may run a risk of missing out on the tax-free allowance. If you were made redundant after six months into a tax year, you will only receive 50% of your tax free allowance. In other words, you will be paying income tax even after earning £3,238. Also, the longer you are out of work, the more amount of tax you will have overpaid.
Can tax really be reclaimed?
Yes, if you have paid excess tax, you can claim this tax back. You can back claim tax for the last 6 years. Using a tax refund calculator you can work out the amount of tax rebate you are eligible to get. However, you must ensure that you also include Jobseeker’s Allowance as a part of your overall income as this is also taxed.
If you are confused about the process, it may be worthwhile hiring a tax expert to claim the tax back for you.