Sometimes when you're working you can end up paying too much Income Tax particularly if you change jobs often or have more than one job at the same time. If you think you've paid too much tax you can take some simple steps to apply for a refund.
When might you have overpaid tax through your job?You may have paid too much tax if:
PAYE (Pay As You Earn) and tax codes.
Your tax code is issued by HMRC and based on information they have about your income and entitlement to allowances. You'll find it on your PAYE Coding Notice (it’s usually sent to you before the start of the tax year and it may also be sent to you at other times if something has changed). Not everyone gets a Coding Notice but the code can also be found on your P45 or your payslip. It tells your employer what your tax-free allowances are and how much tax to deduct from your wages before you get paid. This way of paying tax is called PAYE. If you have several jobs or you work and get a pension you may have more than one tax code. It's important to know what your tax code means so that you can check that you are paying the right amount of tax.
Income Tax Refund
If you've just stopped working, you may be able to claim back some of the Income Tax you've paid. This could be because you've retired, returned to studying or because you've become unemployed.
This guide explains when an Income Tax refund might be due to you and how to claim it.
When a tax refund might be due A tax year runs from 6 April to 5 April. If you stop working part way through a tax year, you might have paid too much tax for that year.
This can happen if you were paying tax through PAYE (Pay As You Earn) as an employee and:
Whether you were employed or self-employed before you stopped work, if you've paid too much tax you'll be able to claim a refund of the amount that you've overpaid.
National Insurance Contributions
Whether you're employed or self-employed or both, there's a limit to the amount of National Insurance contributions you need to pay. If you overpay or wrongly pay National Insurance contributions you can claim the money back. And if you wrongly pay voluntary National Insurance contributions you may be able to claim the money back in certain circumstances.
When might you overpay or wrongly pay Class 1, 2 or 4 National Insurance contributions? You might have overpaid or wrongly paid National Insurance contributions if:
If you've made an error, missed something off your tax return or think you've paid the wrong amount of tax you may still be able to sort it out. If HM Revenue & Customs (HMRC) accept your new figures, you'll receive a repayment or be told how much extra tax to pay.
Correcting mistakes within 12 months
If you make a mistake on your tax return you've normally got 12 months from 31 January after the end of the tax year to correct it. This is called an 'amendment'. For example, for the 2011-12 return you have until 31 January 2014 to make an amendment.
You can only amend your return after this date if you received your return late (after 31 October). In this case you must correct any mistakes within 12 months of the deadline for sending your return back.
If you sent your tax return on paper, you don't need to send in the whole tax return again. Just write to HMRC and attach the return pages that you want to change, clearly marked 'amendment'. You'll find the address on your tax return, your tax calculation or your Self Assessment Statement.
If you sent your tax return online it's easier if you make the amendment online too.
Getting a refund
If you think a refund is due you'll need to tell HMRC how you'd like to receive it.
For convenience you can have it deducted from any tax due on your next Self Assessment Statement if either:
Sometimes HMRC may ask you for more information - to make sure that the figures are correct - before making a repayment.
Paying additional tax If you owe more tax as a result of the changes to your tax return, HMRC will tell you how much you need to pay and when and how to pay it.
Correcting mistakes after 12 months If you want to tell HMRC about a mistake after 12 months, it's too late to amend your return. You have to write to HMRC and tell them about the mistake instead.
Getting a refund In most cases, you'll get the tax you've overpaid back, as long as you claim it in time.
You must make a claim within four years of the end of the tax year that you're claiming for. For example if you paid too much tax in the 2008-09 tax year, you must make a claim by 5 April 2013.If you don't make a claim within the time limit you'll miss out on any repayment due.
You must make your claim in writing and it should include:
Sometimes HMRC may ask you for more information - to make sure that the figures are correct - before making a repayment.
For convenience you can have the repayment deducted from any tax due on your next Self Assessment Statement if either:
Or you can ask for one of the following:
Paying additional tax If you owe more tax as a result of a mistake you've made, you should provide as much detail as possible when you tell HMRC. HMRC will work out the amount due and ask you to make a payment. Depending on the circumstances, you may have to pay interest on the amount due.
Interest on late payment and repayments If you pay tax late or receive a repayment late, HMRC will add on any interest that's due. The rates of interest vary - the rate as at Feb 2013 is 3% per annum calculated pro rata.
If you need more help To get more help you can contact your HMRC office or speak to Tax Affinity Accountants and we will be happy to help.
If you do not complete a Self Assessment tax return but want to claim a tax refund, speak to HMRC as they are the only ones that can help.
Tax Affinity Accountants based in Kingston upon Thames, are expert accountants and tax advisers. To read more visit www.taxaffinity.com/blog.
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More and more Britons look set to be charged tax of 40% on assets passed on to friends and family when they die thanks to changes announced by the Government. But who exactly will be affected and what can you do about it?
In 2009 just 12,000 families in the UK were forced to pay inheritance tax – the fewest since 1938 – but the tax’s net has been rising since then.
And now, to fund a cap on care home costs , the Government is to freeze the inheritance tax threshold at £325,000 until 2019 – three years longer than previously promised – and meaning this limit will not have changed for 10 years.
By keeping the limit static for so long, as house prices rise, more and more people are dragged into a tax charged at a painful 40%.
The threshold has been at the same level since the 2009/10 tax year, but if it had moved in line with Retail Prices Index (RPI) inflation, it would be set to increase to £358,000 in the coming tax year.
John Williams, managing partner at Kuber Ventures, said the move is “in effect, taking from the dead to help the dying”.
He added: “Thousands more people will now be caught by inheritance tax and must now find other means to limit the amount taken from their estate.”
Currently up to £325,000 of inheritance can be passed on to others without being taxed. After the limit is passed, assets are taxed at 40%. On an estate of £500,000, this equates to a tax bill of £70,000.
Married couples and civil partners can combine both their inheritance tax thresholds so that double (£650,000) can be left to beneficiaries tax-free. A spouse’s threshold is automatically transferred when they die.
The tax is highly contentious, not least because it is taking money from assets that may well have already been subject to everyday taxes.
But as a good money spinner for the Government – approximately £2.7 billion was raised by the levy in the 2010/11 tax year – it’s not going anywhere.
However, there are ways to avoid handing over a chunk of your estate to the taxman before it reaches your family or designated inheritors.
Inheritance tax is probably one of the most disliked forms of taxation, but it is also one of the easiest to avoid
The common route to limiting inheritance tax is by reducing the value of an estate before death. This usually is achieved by giving money away, known as gifting, as you get older.
However, it’s worth bearing in mind that any rights or say over “the gift” are given away at the same time.
Any gift, whether cash or asset, is free from inheritance tax if you live for at least seven years from the date of the gift. Of course, it is not always so easy to time the date of your death. If you don’t live seven years after you have made gifts, the assets or cash are counted and use your tax-free allowance up to the threshold (£325,000) first.
Certain investments are exempt from inheritance tax after just two years, but as they are considered relatively high risk, they are not suited to everyone.
Alternatively, life insurance is inheritance tax planning’s “best kept secret”. Taking out a policy means your beneficiaries can use the payout to pay inheritance charges and receive the value of your estate in full. The policy must be written into trust so that payout is
If you don’t expect or are not sure if you will live seven years, money or assets can be given away subject to certain rules, as follows:
• Give to your spouse - Married couples can transfer assets without limit between themselves without paying tax, either during their lifetime or at death.
• Use annual allowance - A gift up to the value of £3,000 can be made to anyone of your choice without being subject to tax. Unused exemptions from the previous tax year can be carried forward to the present tax year – but no further.
• Smaller gifts - As well as the annual allowance above, you can gift up to £250 to any number of people completely free of inheritance tax.
• Give away your income - You can also give away as much of your income away as you please without paying tax. This concession “is widely under-utilised, particularly by those with higher incomes”. If you are using this avenue, it must be a regular gift from post-tax income and leave you with enough money to maintain your standard of living.
• Marriage gifts - Parents and grandparents can make one off gifts (cash or assets) to children or grandchildren of up to £5,000 and £2,500 respectively tax-free when they get married.
• Donations to charities or political parties - Any gifts to these types of organisation, either during your lifetime or through your will are exempt from inheritance tax.
If you are not sure if you will live for seven years but don’t want your beneficiaries to have rights to your assets or money before you die, you can transfer them to a trust.
This allows the gift to be made and starts the seven-year clock ticking, but the gift is delayed until you decide. For example, if the beneficiaries are still young and you don’t want them to receive the money just yet.
To read read more about this or other important tax and accounting issues visit www.taxaffinity.com/blog
Tax Affinity Accountants is a firm of highly qualified accountants who are experts in tax, based in Kingston upon Thames, serving Surbiton, New Malden, Epsom and all surrounding area's.
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David Beckham is at the centre of a political furore in France because of his minimum wage deal at new club Paris St Germain which will see him pay virtually no tax.
The 37-year-old revealed his entire salary - believed to be around £3.4 million - will go to a children's charity in Paris.
But the arrangement means he avoids the controversial 75 per cent tax which President Francois Hollande's government is currently bringing in.
Under French law he must take home the footballer's union minimum wage so the club can pay national insurance and other charges to the government - but this works out at less than £2,000 a week.
The deal means Beckham avoids paying not only the top rate on income tax, but also a three per cent surtax on annual income above £450,000.
With Victoria Beckham and the children remaining in London, Beckham can also claim his main residence is in the UK not France.
The other crucial element of the deal is limiting the contract to five months - anyone living in France for six months or more during a calendar year could be subject to the high band of income tax.
‘He will be paid less than my parliamentary assistant!’ said conservative MP Gerald Darmanin, claiming the Beckham case was another example of why the rich and famous do not want to settle in France.
Mr Darmanin added: ‘Be serious! It’s necessary to convince the Sports Minister to stop this deadly tax process. I’d rather receive 50 per cent of a lot than 75 per cent of nothing!’
Hollywood actor Gerard Depardieu and Louis Vuitton billionaire Bernard Arnault are among a list of high-profile citizens who are reportedly leaving Paris because of the new tax.
But Jerome Guedj, a Socialist MP, insisted that France would benefit in the long run from Beckham being in Paris.
‘Me, I see a symbol,' he said. 'He will create wealth around PSG, image rights, jerseys sold by PSG. This is proof that the tax system in France does not leak.’
Both Beckham and PSG will be able to make money from the ex-England captain’s image rights and other commercial activities.
His share of merchandising rights is likely to be paid into one of the three London-based companies. Footwork Productions, which exploits Beckham’s name and image, including work for Armani, Adidas, Samsung and Diet Coke, paid him nearly £86million in salary and dividends from 2002 to 2010.
PSG is already promoting David Beckham shirts on the club’s website, with an adult top featuring his name and number costing almost £100.
L’Equipe, the biggest sports paper in the country, has already suggested that ‘football’s glamour icon’ was little more than a money-spinning fairground attraction.
It carried a cartoon of the ‘S’ in PSG turned into a dollar sign last week, and wrote: ‘With the signature of the Spice Boy David Beckham yesterday, PSG pulled off a sensational publicity stunt. The sporting interest of the move is less clear.’
Others were even more cruel – with Le Figaro newspaper branding Beckham a ‘third-hand Rolls Royce’.
David's Tax Savings Planning at a glance:
A upcoming change in the housing benefit rules has been dubbed the "bedroom tax", officially though, it is not a tax, but a benefit cut.
Government ministers argue the changes will help cut the £23bn annual bill for housing benefit, free up more living space for overcrowded families, and encourage people to get jobs.
But some housing charities are warning that the result will be higher levels of rent arrears, and greater homelessness.
From the governments own estimates, over half a million tenants will be affected when the new rules take effect in April this year. It says the savings to the taxpayer will amount to £505m in 2012-13, and £540m in the year after.
What is going to chang?
The rules will affect housing benefit, which is paid to less well-off tenants to help with rent. Typically claimants receive between £50 and £100 a week.
From April 2013 families deemed to have too much living space by their local authorities will receive a reduced payment. Under the government's so-called "size criteria", families will be assessed for the number of bedrooms they actually need.
Who can be affected?
Changes affects council tenants, and those who rent from housing associations. It does not affect private sector tenants.
Government estimates show that 660,000 households will have their benefit cut, roughly a third of social sector claimants. Only those of working age will see reduced payments.
How much may people lose?
If a tenant is deemed to have one spare room, they will lose 14% of their benefit. If they have two or more spare rooms, they will lose 25%.
Government ministers says that will mean an average loss of about £14 a week for council tenants. Those who rent from housing associations are facing an average loss of about £16 a week.
So how many bedrooms are you allowed?
The rules allow one bedroom for each adult or couple. Children under the age of 16 are expected to share, if they are the same gender. Those under 10 are expected to share whatever their gender.
But disabled tenants will be allowed a bedroom for full-time carers. The number of bedrooms in the property will be determined by the landlord's tenancy agreement, so you cannot claim a bedroom is actually a living room.
So Can you keep a spare bedroom?
Sorry No, and especially not without losing benefit. Parents who are separated are not allowed to keep a vacant bedroom for a child who visits. Foster children are not counted as permanent members of a household.
And what about students?
From April 2013, parents will not be penalised if a student is away, as long as he or she sleeps at home for at least two weeks a year. But when universal credit comes in from this autumn, students will need to be at home for at least six months to avoid a benefit cut.
And what about lodgers?
From April 2013, claimants with a paying lodger will be allowed to keep the first £20 of weekly rent. But housing benefit will be then be cut, pound for pound, on the rest of the rent they receive.
But, after universal credit is established, housing benefit will be cut, but tenants will be allowed to keep all the rental income (although only the first £4,250 of annual rent is free of income tax).
And are pensioners exempt?
Again from April, if either half of a couple are of pensionable age, they will not suffer reductions to housing benefit.
Under universal credit, both will need to be over pensionable age, or one will need to be in receipt of pension credit, in order to qualify for the maximum benefit.
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